Control over the manner in which a government processes its financial transactions is the responsibility of management. This always includes the governing board, who generally has delegated this day-to day oversight to the recorder, city manager, finance officer or city administrator.
Basic control procedures related to municipal finances and compliance issues are prescribed by the Comptroller of the Treasury, Division of Local Government Audit, in the Internal Control and Compliance Manual for Tennessee Municipalities (City Manual). The City Manual is updated regularly and can be located on the Division of Local Government Audit’s website. Two valuable resources for municipalities to use in structuring their financial and compliance practices are the City Manual and a book titled Government Accounting, Auditing and Financial Reporting more commonly called the Blue Book, published by the Government Finance Officers Association (GFOA). The latest version of the Blue Book is the 2012 revision. Finance staff of each city should use this publication as a reference book in recording and reporting financial transactions of the city.
If basic procedures for financial and compliance practices have not been implemented by your government then you will more than likely have audit findings. To improve controls municipal officials should begin implementing the procedures from the City Manual and not wait on the auditors. The City Manual should be used as the minimum standard overseeing operations. Municipal management should add other procedures to further strengthen the reliability of financial data as necessary. GFOA also has several “best practice” publications available that will be beneficial in determining controls to implement.
Chapter one of the City Manual states in part:
“Developing an adequate internal control system requires continual analysis and modification to address changing circumstances. Municipal officials should identify and address additional objectives that are relevant to their operations”.
It further details specific checks and balances municipal officials should implement such as reconciling property taxes receivable detail from the general ledger to the balance of unpaid taxes in the property tax roll. Another requirement is that utility billings, collections and receivable balances be reconciled from the utility billing system to the detailed general ledger. Other procedures include reconciling fines collected to ticket records and court dockets; periodically testing petty cash balances; and daily cash balancing. It also emphasizes the need to separate the duties of authorization, recordkeeping (posting), custodial (cash and materials handling) and the review of related records, to ensure one person does not have complete control of the process from beginning to end. The separation of duties and review by management decreases the risk of theft, loss, error, or manipulation occurring and not being detected by municipal officials in a timely manner.
Municipal officials have the responsibility to ensure that municipal resources are being utilized in the most effective ways possible. No one likes to deal with red tape or jump through hoops to get things done but in order to maximize efficiency, controls must be implemented. Think about it, is the city or town receiving all the fines and fees it is entitled to from county court cases? How does anyone know if no comparison is done to see what should be collected? Are those rising fuel costs only because the price of fuel has skyrocketed? How do you know gas is not disappearing if a system is not in place to monitor usage by various departments?