Johnsburg Town Hall
New York State Comptroller Thomas DiNapoli’s office recently filed an audit for the town of Johnsburg and made several recommendations regarding management oversight and online banking.
The Comptroller’s Office evaluated the town’s oversight of financial activities and internal controls over online banking for the period Jan. 1, 2011 to July 31, 2012. The audit addressed the following related questions:
• Did the Board adequately design, implement, and monitor internal controls over the Town’s financial activities?
• Did the Board adequately design and implement policies over online banking that ensure the protection of the Town’s assets and data?
The Comptroller’s Office listed four findings:
- The Town Board did not adequately design, implement, or monitor internal controls over the town’s financial activities. The supervisor did not provide effective oversight of the work performed by the bookkeeper to address her incompatible financial duties. Because the bookkeeper can initiate transactions, make accounting entries, and perform bank reconciliations without any supervision, there is a risk that she could initiate and conceal inappropriate transactions that could go undetected and uncorrected. Further, the Board did not conduct an annual audit of the records of officials and employees who receive and disburse cash. The Board’s failure to perform an annual audit diminishes its ability to effectively monitor the town’s financial operations and could result in errors or irregularities that are undetected and uncorrected.
- The Board did not design and implement policies over online banking that would have ensured the protection of the town’s assets and data. The town did not establish a written policy for online banking that defined the Board’s intentions. While the town’s bank has an “Internet User Agreement,” town officials were unaware of its provisions or that it existed. The bank’s agreement did not address which town officials were authorized to initiate online transfers or security procedures for authenticating transactions. Without a comprehensive online banking policy, it is possible that an unauthorized individual could initiate an online transfer and that it would remain undetected and uncorrected.
- The supervisor has not adequately segregated the bookkeeper’s online banking duties. Also, the supervisor had not reviewed or supervised the bookkeeper’s online banking transactions totaling more than $1.8 million made during the first six months of 2012. In addition, the town has not established a confirmation process with its bank for online transfers of town moneys. Although we did not find any discrepancies with the $1.8 million in online transfers, because the bookkeeper’s incompatible online banking duties are not adequately segregated, there is an increased risk that moneys may be transferred improperly, or that online transfers will not be properly recorded and documented.
- The audit disclosed additional areas in need of improvement concerning IT controls, which, because of their confidential nature, were disclosed separately to town officials.
In the management oversight section, the Comptroller’s Office made two recommendations:
- The supervisor should segregate the bookkeeper’s incompatible financial duties or provide adequate oversight of the bookkeeper’s work.
- The Board should conduct, or contract for, an annual audit of the records and reports of all officers and employees who received or disbursed money during the previous fiscal year.
In the online banking section, the Comptroller’s Office made three recommendations:
- The Board should adopt and communicate an online banking policy that outlines approved online banking activities and assigns responsibility for ensuring that the transactions are safely conducted and monitored.
- The Board should ensure that the online banking agreement with its bank identifies who is authorized to initiate and approve online transfers and establishes security procedures for authenticating online transfers.
- The supervisor should authorize and approve all online transfers performed by the bookkeeper.
In a letter from Johnsburg Town Supervisor Ron Vanselow to the Comptroller’s Office, dated April 9, 2013, the supervisor listed ways he and the Town Board are addressing the findings of the audit:
“Regarding the Management Oversight portion of your report, the Town Supervisors office has already instituted some controls as far as the town’s bookkeeper’s duties, and the town board is now conducting physical examinations of all town records for all town offices that receive or disburse monies. These policies will be formalized by resolutions of the town board in the near future.
“Regarding the Online Banking portion of your report, the first two recommendations are being addressed through dialogue with our banking institution and will also be formalized by board resolution in the near future. The third recommendation has already been addressed as the Town Supervisor is now authorizing and approving all online transfers done by the bookkeeper.”
To see the audit, visit the Comptroller’s Office website at http://www.osc.state.ny.us/localgov/audits/towns/2013/johnsburg.htm.