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									                                         MANAGEMENT LETTER

City of Akron
Summit County
166 South High Street
Akron, Ohio 44308

To the City Council:

In accordance with Government Auditing Standards applicable to financial audits, we have audited the
financial statements of the City of Akron, Summit County, Ohio, (the City) as of and for the year ended
December 31, 2003, and have issued our report thereon dated June 23, 2004.

Government Auditing Standards also require that we describe the scope of our testing of compliance with
laws and regulations and internal control over financial reporting and report any irregularities, illegal acts,
other material noncompliance and reportable conditions in internal controls. We have issued the required
report dated June 23, 2004, for the year ended December 31, 2003.

Office of Management and Budget Circular A-133 requires that we report all material (and certain
immaterial) instances of noncompliance, and reportable conditions in internal control, related to major
federal financial assistance programs. We have issued the required report dated June 23, 2004, for the
year ended December 31, 2003.

We are also submitting for your consideration the following comments on the City’s compliance with
applicable laws and regulations and on its internal controls. These comments reflect matters that, while
in our opinion do not represent material instances of noncompliance or reportable internal control
conditions, we believe represent matters for which improvements in compliance or internal controls or
operational efficiencies might be achieved. Due to the limited nature of our audit, we have not fully
assessed the cost-benefit relationship of implementing the recommendations suggested below.
However, these comments reflect our continuing desire to assist your City. If you have any questions or
concerns regarding these comments please do not hesitate to contact us.


1.    Ohio Constitution, Article XII, Section 5a, states that interest earned on money derived from a
      motor vehicle license or fuel tax must follow the principal.

      The Treasurer made investments of pooled cash from various funds, including the Gasoline Tax
      Fund (#20700) and Tag Tax Revenue Fund (#40300) and did not distribute the interest earned in
      accordance with the above requirements.

      The City should apportion future interest earnings to these funds based on a reasonable
      determination of its share of the investment pool. The amounts were not considered material and
      accordingly, the financial statements do not reflect adjustments for interest revenue.
City of Akron
Summit County
Management Letter
Page 2

                                    NONCOMPLIANCE (Continued)

2.   Ohio Rev. Code Sections 5705.14, 5705.15 and 5705.16 provides guidelines pertaining to
     allowable interfund transfers. Generally, money may be transferred from the general fund to any
     other fund of the subdivision by resolution of the taxing authority. However, except in a few limited
     circumstances, transfers made from funds other than the General Fund, are generally prohibited
     without the approval of the tax commissioner and Court of Common Pleas.

     During the year, the City transferred $24,203,607 from funds other than the General Fund, for
     various purposes including, but not limited to, grant matching, debt service, expense
     reimbursements and operating subsidies. These transfers were reclassified to expenses in the
     appropriate funds for financial reporting.

     The City should eliminate interfund transfers by charging expenses directly to the funds incurring
     the costs rather than through use of interfund transfers. If operating transfers are required, prior to
     making the transfers, the City should consult with its legal counsel and review the requirements of
     Ohio Rev. Code Sections 5705.14, 5705.15 and 5705.16, to ensure that such transfer is not
     prohibited under law. Further, all transfers including those made from the General Fund should be
     individually approved by the City Council.

     Failure to abide by the requirements of Ohio Rev. Code Sections 5705.14, 5705.14 and 5705.16
     with respect to future interfund transfers, may result in the Auditor of State reporting a material
     noncompliance citation including a “Finding for Adjustment” in which the City would be requested to
     return improperly transferred funds to their fund of origin.

3.   Ohio Rev. Code Section 9.38 requires public money to be deposited with the treasurer of the
     public office or to a designated depository on the business day following the day of receipt. If the
     amount of daily receipts does not exceed $1,000 and receipts can be safeguarded, public offices
     may adopt a policy permitting their officials who receive money to hold it past the next business
     day, but the deposit must be made no later than 3 business days after receiving it. If the public
     office is governed by a legislative authority, only the legislative authority may adopt the policy.
     Ohio Rev. Code 117.01 (C) defines “Public money” as any money received, collected by, or due a
     public official under color of office, as well as any money collected by any individual on behalf of a
     public office or as purported representative or agent of the public office.

     During 2003, a campaign fund raiser was held at the City’s two municipal golf courses. Participants
     were to pay $100 to the golf course to cover the cost of greens fees, prizes, food and beverages.
     The food and beverages were provided by a privately own restaurant located at the golf course.
     There were approximately 158 participants at the fund raiser; therefore $15,800 should have been
     collected for the golf outing. Of the $15,800, $4,740 was due to the golf course for greens fees
     ($30 each), $1,800 of gift certificate prizes, and $9,260 was due to the restaurant for food and

     The receipts for this event were not collected on the day of the event, but believed by golf course
     personnel to have been deposited subsequent to the event. However, due to insufficient receipt
     records and the possible commingling of these receipts with other daily revenues, no specific
     receipt documentation for this event could be located. In addition, it is also believed that some of
     the checks originally made payable to the City golf course for this event were endorsed over to the
     restaurant and were never deposited with the City. This is evident by the fact that approximately
     two weeks after the event, the restaurant refunded the City $729.63 for overpayment of the
     restaurant for this event. This money was then deposited into the City’s golf course fund.
City of Akron
Summit County
Management Letter
Page 3

                                    NONCOMPLIANCE (Continued)

3.   Ohio Rev. Code Section 9.38 (Continued)

     In addition, we noted that the City’s golf fees are approved by the Service Director, but are not in
     writing, and there is no formal policy covering special events or group rates for golf outings at the
     City owned golf courses.

     The City should consider implementing the following controls to enhance its golf course operations.

               All checks, cash, and other forms of payment collected by the City or one of its
               departments constitute “Public money” as defined by the Ohio Revised Code 117.01 and
               should be deposited in accordance with Ohio Revised Code section 9.38.

               When the City collects revenue which is due to a third party, the revenue should be first
               deposited into a City account and a City check should be issued to the third party in
               accordance with the City’s general expenditure procedures.

               Golf course fees should be approved in writing and the City should consider incorporating
               a group/special event rate into its fee structure which includes food and beverage costs.

               Special event and/or group fees received should be separately noted on the daily deposit
               forms and not commingled with other daily receipts.

               All special event and/or group fees should be collected on the day of the event and a
               reconciliation should be prepared documenting the number of participants times the rate
               per person compared to the revenue collected. Over collections should be settled via a
               refund check from the City and under collections should be settled with the group
               coordinator at the time of the event.

       An investigation into this matter is ongoing and the outcome cannot be determined as of the date
       of this report.


1.   Old Outstanding Checks

     At December 31, 2003, approximately 706 of 950 or $69,053 of $149,492 of the City’s outstanding
     payroll checks were greater than one year old, with some dating as far back as December 1978.
     Also, approximately 533 of 965 or $81,890 of $3,578,615 of the City’s general depository
     outstanding checks are greater than one year old with the oldest dating back to January 2000. The
     City has no written policy regarding the writing off of old or stale checks.

     The City should develop a written policy regarding writing off of old or stale checks following the
     guidance provided for in Auditor of State Management Advisory Services Bulletin 91-11. This
     bulletin indicates that pursuant to Ohio Rev. Code Section 9.39 unclaimed money shall be
     deposited to the credit of a trust fund and shall be retained there until claimed by its lawful owner. If
     not claimed within a period of five years, the money shall revert to the General Fund. The City
     should also consider placing an ad in a local newspaper listing the names of individuals with
     outstanding checks in an effort to clear up these items.
City of Akron
Summit County
Management Letter
Page 4

                                  RECOMMENDATIONS (Continued)

2.   Receipt Posting

     The City should consider the following enhancement to its receipt posting procedures to better
     reflect the financial activities of the City.

             Homestead and Rollback revenues should be classified as Grant/Subsidy as opposed to
             Taxes. These amounts represent statutory reductions in property tax bills which are
             reimbursed by the State and have different accrual and revenue recognition criteria from
             property taxes.

             Property Tax revenues should be recorded at gross and the fees deducted by the County,
             which are a cost of doing business, should be reported as expenditures in the appropriate

             Non-exchange transaction revenues received from other governmental entities such as the
             State of Ohio, generally should be classified as a Grant/Subsidy (Intergovernmental type)
             revenue versus Charges for Services, Miscellaneous or any other revenue classification, to
             best reflect the fact that a service was not provided in exchange for the revenues received.

3.   Off-Street Parking Service Contract

     The City has contracted its off-street parking division receipt processing, which is a significant
     accounting function, to a third-party administrator. The City has not established procedures to
     determine whether the service organization has sufficient controls in place and operating effectively
     to reduce the risk that parking receipts have not been accurately processed.

     The City should implement procedures to assure the completeness and accuracy of parking
     receipts processed by its third-party administrator. Statement on Auditing Standards (SAS) 70 as
     amended, prescribes standards for reporting on the processing (i.e. control and design and
     operation) of transactions by service organizations. An unqualified Tier II “Report on Policies and
     Procedures Placed in Operation and Tests of Operating Effectiveness” in accordance with SAS No
     70, should provide the City with an appropriate level of assurance that parking receipts are being
     processed completely and accurately.

     The City should specify in their contract with the third-party administrator that an annual Tier II SAS
     70 audit report be performed. The City should be provided a copy of the SAS 70 report timely and
     should review the report’s contents. A SAS 70 audit report should be conducted in accordance with
     American Institute of Certified Public Accountants’ (AICPA) Standards by a firm registered and
     considered in “good standing” with the Accountancy Board of the respective State. If the third-party
     administrator refuses to provide you with a Tier II SAS 70 report, we recommend you only contract
     with a third party administrator that will provide such a report.

4.   Budgeted Revenues

     The City initially did not use the County Fiscal Officer approved Amended Certificate of Estimated
     Resources as the basis for the revenue budgets presented in its budgetary basis financial
City of Akron
Summit County
Management Letter
Page 5

                                  RECOMMENDATIONS (Continued)

4.   Budgeted Revenues (Continued)

     Ohio Rev. Code Section 5705.39 requires that total appropriations from each fund not exceed total
     estimated fund resources from each fund. In order for the City’s budgetary financial statements to
     demonstrate the City’s legal budget and compliance with Ohio Rev. Code Section 5705.39, the
     budgeted revenue amounts presented in the budget basis financial statements must agree with
     Amended Certificate of Estimated Resources. The “Original” budgeted revenue amounts should
     agree with the Amended Certificate in effect at the time the first full year appropriation resolution
     was approved and the “Final” budgeted revenue amounts should agree with the last Amended
     Certificate of Estimated Resource submitted to the County Fiscal Officer for approval prior to
     December 31st of each year.

5.   Budgetary Statement Revenue Classifications

     The revenue classifications used on the City’s budgetary basis financial statements do not
     correspond with the GAAP basis financial statements and the General Fund’s statement presents
     the majority of the fund’s revenue under the classification “Other”.

     The budgetary basis of accounting is the basis used by the City on a daily basis and the basis
     under which the City must appropriate its funds. Failure to disclose the details of the City’s
     revenues under this basis of accounting impairs the usefulness of the financial statements to
     internal and external users since the users are unable to review the details of the activity under
     which the City operates on a daily basis. In addition, use of different revenue classification between
     the budgetary and GAAP financial statements, makes it difficult for users to understand the
     differences between the two basis of accounting further impairing the overall usefulness of the
     financial statements.

     The City should use the same or similar revenue classifications between its budgetary and GAAP
     financial statements and should avoid reporting significant amounts of revenue under the caption
     “Other” or similar non-descriptive titles. In addition, the City should follow the guidance provided for
     in Auditor of State Bulletin 97-010 with respect to accounting treatment for reclassifications of errors
     between budgetary and GAAP financial statements.

6.   Blanket Fiscal Officer Certificates

     The City uses blanket purchase orders for a variety of goods and services. These blanket
     purchase orders include the fiscal officer’s certification pursuant to Ohio Rev. Code 5705.41(D) and
     are valid for one year. The City, however, has no policy or ordinance regarding the use of these

     Ohio Rev. Code Section 5705.41 (D) states, in part, that fiscal officers may prepare “blanket”
     certificates for a certain sum of money not in excess of an amount established by resolution or
     ordinance adopted by a majority of the members of the legislative authority against any specific line
     item account over a period not running beyond the current fiscal year (revised effective September
     26, 2003). The blanket certificates may, but need not, be limited to a specific vendor. Only one
     blanket certificate may be outstanding at one particular time for any one particular line item
     appropriation. In addition to these blanket certificates, a subdivision may also make expenditures
     and contracts from a specific line-item appropriation account in a specified fund for most
     professional services, fuel oil, food items and any other specific recurring and reasonably
     predictable operating expenses. These super blanket certifications should not extend beyond the
     fiscal year.
City of Akron
Summit County
Management Letter
Page 6

                                   RECOMMENDATIONS (Continued)

6.   Blanket Fiscal Officer Certificates (Continued)

     The City Council should establish, by ordinance, a policy regarding the use of the blanket
     certificates (purchase orders) in accordance with the requirements of Ohio Rev. Code Section

7.   Infrastructure Capitalization Policy

     Governmental Accounting Standards Board (GASB) Statement 34 requires governments to
     capitalize and depreciate over their estimated useful lives general infrastructure assets such as
     roads, bridges and culverts. In order to report general infrastructure assets on a reasonable and
     consistent basis, a formal policy should be adopted which outlines the types of costs associated
     with these assets, and whether these costs will be capitalized or expensed.

     The City’s 2003 Comprehensive Annual Financial Report (CAFR) discloses that costs for
     maintenance and repairs are expensed when incurred and that costs of repairs and upgrades that
     materially add to the value or life of an asset are capitalized (subject to the dollar thresholds
     established by the City.) This treatment is consistent with the requirements of GASB 34. However,
     the City does not have a schedule or policy in place defining specific maintenance costs that are
     considered to add value and extended an assets useful life versus costs that are expensed as

     The City’s accounting department should consult with the City engineer’s office and develop a
     formal schedule of various types of common repairs and maintenance performed on the City’s
     infrastructure (i.e. chip and seal, resurfacing, etc.), their useful lives, and should define which
     common infrastructure maintenance costs should be capitalized versus being expensed.
     Development of such a schedule will help ensure that the City is consistent with its capitalization of
     infrastructure costs over time and help ensure consistent financial reporting.

8.   Delegation of Legislative Authority

     In the case of C. B. Transportation, Inc. v. Butler County Board of Mental Retardation, 60 Ohio
     Misc. 71, 397 N.E.2d 781 (C.P. 1979), as well as, Burkholder v. Lauber, 6 Ohio Misc. 152
     (1965), it was held that a board or officer whose judgment and discretion is required, was chosen
     because they were deemed fit and competent to exercise that judgment and discretion and unless
     power to substitute another in their place has been given, such board or officer cannot delegate
     these duties to another. Consistent with such reasoning, Auditor of State Bulletin 97-010 states,
     in part that, the legislative body of a local government may not delegate its authority to establish
     appropriations. The appropriations process is a function of the legislative authority that must be
     performed by those specific individuals elected to fulfill that responsibility. This bulletin also notes
     that the level at, or above, which a government’s management may not reassign resources without
     legislative approval is known as the “legal level of control”. In Ohio, the “legal level of control” is the
     level (i.e., fund, function, object, etc.) at which the appropriation measurer is passed by the
     authority of a local government.

     Ohio Rev. Code Section 5705.14 requires that except in the case of transfers from the general
     fund, transfers can be made only by resolution of the taxing authority passed with the affirmative
     vote of two thirds of the members. Transfers from the general fund require a resolution passed by
     a simple majority of the board members (i.e., a two thirds vote is not required for general fund
     transfers though a resolution is required).
City of Akron
Summit County
Management Letter
Page 7

                                   RECOMMENDATIONS (Continued)

8.    Delegation of Legislative Authority (Continued)

      Section 29 of the City’s 2003 appropriation ordinance (Ordinance 575-2002, 12/9/2002) (the
      Ordinance), states, “that [appropriation] transfers of sums of $15,000 or less, within the classes of
      disbursements listed in this ordinance, are hereby authorized and approved by City Council as
      transferred upon the approval of the Director of Finance”.

      Although we noted no appropriation adjustments made without the formal approval of the City
      Council during 2003, Section 29 of the Ordinance appears to give the Director of Finance the
      authority to adjust appropriations at the “legal level of control” contrary to the guidance of Auditor of
      State Bulletin 97-010.

      Section 32 of the Ordinance states “that the Finance Director is hereby authorized to transfer

      Under section 32, the Director of Finance made inter-fund transfers during the year the details
      (amount and funds) of which were not approved by Council in the minutes. Such broad provision as
      that in section 32 amounts to delegation of authority. Ohio Rev. Code Section 5705.14, requires a
      majority vote of the taxing authority for all transfers.

      The City should consult with its legal counsel to determine in what manner the verbiage of Sections
      29 and 32 should be revised for its future appropriation and transfer resolutions.

9.    Frequent Flyer Mileage

      The City does not have a policy regarding the accumulation of “frequent flyer” mileage by
      employees while on official business for the City.

      The City should adopt a policy regarding the accumulation and use of “frequent flyer” miles that
      either (1) prohibits the accumulation of “frequent flyer” miles by officials and employees of the City
      or (2) requires any such miles earned to be used for future official travel for that employee or
      another employee of the City, or to forfeit any such miles. In developing such a policy, the City
      should consider Ohio Ethics Commission Advisory Opinion No. 91-010 which applies to State
      officials and employees.

10.   Security Policies and Procedures

      With the computerization of financial reporting processes and the movement toward larger and
      more open computer networking models, organizations must make computer security a top priority.
      Information access issues must be addressed by management to ensure that both the
      organization’s computer resources and data are protected. Typically, management develops
      security policies to define the risks associated with the computer environment and to define the
      procedures necessary to mitigate those risks.

      Security policies and procedures have not been developed by the City of Akron. Although some
      procedures for administering user access are in place; they are not part of an overall framework
      used to address security concerns.
      Comprehensive information security standards and policies should be developed, and applied to all
      computing environments and should be communicated to all employees. The policies and
      procedures should address the known security risks associated with the computing environment at
      the City. At a minimum, policies and procedures should include the following:
City of Akron
Summit County
Management Letter
Page 8

                                   RECOMMENDATIONS (Continued)

10.   Security Policies and Procedures (Continued)

            Proper use of the City of Akron’s computer hardware and software
            Confidentiality of information (i.e. passwords, resident information and financial data), in
            electronic as well as hardcopy format
            System implementation and security change control guidelines
            Security control standards (password; login; etc.)
            Remote access standards
            Virus protection policies
            Adherence to software licensing agreements
            Documentation of the penalties for violation of the security policies.

11.   Logical Access Controls

      Logical access controls are vital to ensuring that access is restricted to only those individuals that
      require such access to perform their job functions. User authentication and intrusion detection
      controls are typically instituted to reduce the risk of unauthorized access to computer resources.
      Similarly, controls over security or system configuration capabilities restrict access to a small
      number of users with direct responsibility for the system.

      The City has instituted some limited authentication and intrusion detection controls. Passwords are
      required to access the network, application servers, and applications resources, but these
      passwords are not changed on a periodic basis. Controls regarding the composition of passwords
      are also not used. Login attempts are monitored in the Windows NT domain environment and
      configuration settings lock out user accounts after three logon attempts. Application servers within
      the NT domain and the R/S 6000 server do not have logon controls implemented.

      Five MIS support staff, as well as two individuals who support two smaller Windows NT domains,
      have been provided with domain administrative access for the City’s administrative Windows NT
      network. Additionally, the users of the R/S 6000 system have been included in the system
      administrative group, thus giving them administrator privileges.

      Weak authentication and intruder detection controls increase the risk of unauthorized access to
      computer resources. The provision of administrative access to many individuals increases the risk
      that this access could be used inappropriately. If access is obtained or inappropriately used, these
      unauthorized users could create or alter financial transactions that could affect the financial

      The City should review the current user authentication and intruder detection controls used by the
      various systems throughout the City. Where applicable, password and login controls should be
      strengthened. Password minimum lengths should be at least six characters and password
      expiration intervals of no more than 60-90 days should be implemented. Login parameters should
      be consistently implemented to “lock out” a user account after three login failures. The lock out
      period should be designed to discourage attempts to guess a user’s password. Ideally, the account
      should remain locked until a system administrator unlocks the account. The City should also review
      the accounts with administrative access to determine if the access provided is commensurate with
      the account owner’s job function. This access should be limited to as small a group as possible.
City of Akron
Summit County
Management Letter
Page 9

                                   RECOMMENDATIONS (Continued)

12.   Physical Access to the Computer Room

      Physical access controls are vital for ensuring that both the computer equipment and data within
      the systems are properly controlled. The computer room is not restricted to only those individuals
      needing that access. The doors of both the computer room itself and staff offices outside of the
      computer room are not locked.

      Without adequate physical security, there is an increased risk that unintentional or intentional
      damage to the computer equipment and/or data may result in the disruption of services to the City.

      The City should take steps to restrict access to the computer room.

13.   Strategic Planning

      A long range strategic plan is an effective tool for assessing the needs of the organization and
      coordinating the resources necessary to meet those needs. The plan should include the projected
      hardware, software and personnel necessary to meet the needs of the organization. Long range
      planning reduces the risk of the development of data processing operations that are inefficient or
      are inconsistent with the goals of the City.

      The City has taken steps to identify areas of improvements via departmental planning by the MIS
      and Safety departments and through the 2002 Technology Committee Report; however, the City
      does not have a comprehensive long range strategic plan. Without a strategic plan, an organization
      cannot effectively plan for the future direction and use of technology and information resources.
      Additionally, without a plan, the organization does not have a guideline or benchmark to use for
      comparison purposes to ensure it is moving in the intended direction.

      The City should develop a comprehensive strategic plan. It should encompass City wide
      technology needs over an extended period of time. The plan should be implemented, revised and
      updated as forecasted growth and objectives change.

14.   Backup Rotation

      The off-site rotation of back-up disks to a secure location helps minimize the risk associated with
      data loss in the event of a disaster that destroyed the City’s data center. The City does not rotate
      the Oracle server, NT application, or mainframe back-up disks off-site. Backups for the Utility
      server are rotated off-site, but only to an adjacent building.

      Without off-site rotation there is a greater risk that data vital to the operation of the City may not be
      available when needed, causing excessive computer down-time, or complete data loss. If the off-
      site location is in close proximity to the data center, the back-up disks are vulnerable to all
      environmental hazards affecting the original data source.

      Backup tapes should be rotated and stored at a remote facility. The remote storage area should
      provide access to only authorized individuals, and have an environment that would not compromise
      the tape’s magnetic media (i.e., secure, fireproof).
City of Akron
Summit County
Management Letter
Page 10

                                      RECOMMENDATIONS (Continued)

15.   Application Upgrade and Program Change Procedures

      The use of documented application maintenance procedures is vital to ensure adequate control
      throughout the program change process. Written procedures help ensure that computer application
      updates and modifications are authorized, tested, installed correctly, and meet management’s
      requirements and deadlines.     The procedures should cover such areas as authorization
      procedures, testing standards, approval procedures for users, approval procedures for data
      processing management, implementation standards and documentation standards.

      During our review it was noted that informal procedures are used to make a request for changes to
      in-house supported applications or apply patches provided for the vendor supported applications.
      Without effective change controls, unauthorized changes may be made, changes may not be
      sufficiently tested, changes and fixes may not be installed correctly, and changes may not meet the
      needs of the user, all of which may affect the stability of the application.

      The City should establish policies and procedures governing the process by which changes and
      patches are made to applications. The policies and procedures should address authorization,
      testing, transfer of changes into the live environment, and documentation of changes. Additionally,
      control points should be developed to ensure compliance with the newly developed policies and

16.   Disaster Recovery Planning

      The creation and use of a comprehensive, disaster recovery plan minimizes the risk of loss of data,
      and the risk that computer operations important for the functioning of the City will not be restored in
      a timely, cost effective manner after a disastrous event. The City of Akron has not created a
      disaster recovery plan. Without a disaster recovery plan, the City could incur substantial costs in
      attempting to retrieve and recreate pertinent financial information for internal and external purposes.

      A disaster recovery plan should be developed which:

              Addresses the hardware, software and communication needs for processing at the
              alternate site, as well as develops a priority list for application processing.

              Identifies key personnel necessary for processing at an alternate site. Establishes training
              for the key personnel and allows for the periodic testing of the transfer of processing to the
              alternate site.

              Establishes a manual backup process to bide the organization over to the point that crucial
              systems can be recovered. The backup process should address personnel, hardware and
              software requirements as well as the manual flow of paper transactions through the
              necessary authorization trail.

      In addition, the City should:

              Prepare a structured test of the plan, periodically test the plan, formally address the result
              of the test, and update the plan based on the results. There should be an appropriation for
              this testing in each yearly budget.

              Distribute a copy of the plan to all key employees and store the plan off-site with the back-
              up tapes.
City of Akron
Summit County
Management Letter
Page 11

                                  RECOMMENDATIONS (Continued)

17.   Matching Revenues with Expenditures

      The City paid the administrative expenses associated with the operation of its HOME Program out
      of the Community Development fund. Throughout the year, the City drew down federal HOME
      Program funds as reimbursement for these administrative expenses. These administrative
      reimbursement drawdowns were recorded in the HOME Program fund.

      We recommend that the City record its federal reimbursement revenues in same fund from which
      the money was originally expended. This will help to ensure that federal funds are being used
      properly, and that accurate remaining fund balances are being reported at fiscal year end.

18.   Equipment Listing and Inventory

      During testing, it was noted that the Rehabilitation Division does not maintain a master listing of
      their federally funded equipment nor did they complete a physical inventory during the past two

      The Rehabilitation Division should maintain a listing of all federally funded equipment. The
      equipment listing should include a description of the equipment, serial number or other identification
      number, source, who holds title, acquisition date and cost, percentage of federal participation in
      cost, and location. The Rehabilitation Division should also complete a physical inventory at least
      once every two years to ensure that equipment is being properly accounted for.

19.   Reconciliation of the IDIS System to Banner

      During testing of the reporting and program income requirements of the CDBG Entitlement, it was
      noted the City enters program income into both the IDIS system and the Banner system. However,
      due to miscommunication among the Accounting, Comprehensive Planning, and Rehabilitation and
      Development Services divisions although program income is shown in IDIS as being expended, the
      monies were never transferred out of the Banner fund 25203 for the expenditures. Therefore,
      Banner shows an undisbursed balance of $288,810 at December 31, 2003. It was also noted that
      reports generated by IDIS do not trace to the Banner system due to timing differences. A
      reconciliation of these two systems is performed by the IDIS Administrator; however, these
      reconciliations were not maintained.

      The City should reconcile the reports generated by the Banner system to the reports that are
      generated by the IDIS system to help ensure that CDBG monies are accurately accounted for.
      These reconciliations should be completed and reviewed (at least on a monthly basis) by the
      appropriate departments to ensure that actual CDBG expenditures contained in IDIS are recorded
      in Banner.
City of Akron
Summit County
Management Letter
Page 12

These comments are intended for the information and use of the management and the City Council and
are not intended to be and should not be used by anyone other than these specified parties.

Betty Montgomery
Auditor of State

June 23, 2004

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