An audit of the City of Holbrook’s financial statements found that the city has complied with state requirements and that the statements are accurate. Auditors did point out, however, that the city lacks some internal controls, especially in regard to issuing checks, bank reconciliations, and policies and procedures.

“In our opinion, the financial statements referred to present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, and each major fund of the City of Holbrook, Arizona, as of June 30, 2014…,” the auditor’s report noted.

The city was found to be in compliance with expenditure limitations and government reporting standards. Expenditures from the Highway User Revenue Fund (HURF) were also found to be in compliance with state regulations.

City Manager Ray Alley previously notified the city council that the auditors had identified deficiencies in separation of duties. He told the council that the issues raised by the auditors stemmed directly from having a limited staff. Alley also noted that many small communities receive the same type of comments during an audit because there simply aren’t enough staff members to separate all financial responsibilities in a way that would satisfy the auditors.

In the report the auditors note that although the city council gives approval for issuance of checks, a stamp is used in place of a signature and the person whose signature appears on the check has not compared the actual check issued against the invoice. In addition, the auditors recommend that the checks be prepared for mailing by a different individual than the one who prepared them.

“Check signers should review supporting documents for each check prepared and evidence their review by actually signing the check. The city should not use a signature stamp for signing checks. Signed checks should not be returned to the person that has prepared the check,” the audit notes. “Management realizes the importance of separation of duties and is looking into ways to fulfill this requirement with minimal staff.”

Auditors also found that cash bank reconciliations were not being reviewed by a separate individual after they were initially completed and recorded. It was recommended that the city assign an individual to conduct monthly reviews.

City officials responded that the city is working toward training additional staff, however, “with minimal staff this has been difficult to fulfill.”

The audit also found that new procedures should be put in place to catch errors or misstatements in the audit reports prior to the start of the audit.

“We recommend that management review all audit entries to help in identifying areas in the accounting system that required adjustment,” the report states. “The finance department should ensure that these areas are complete before each audit.”

A lack of written policies and procedures for accounting practices was also cited by the auditors in the report.

“During our audit, it was noted that there are no written accounting policies and procedures,” the report states. “We recommend that the city institute a program to methodically identify and document its significant accounting processes.”

Auditors noted that city officials responded that they “will work on documenting significant accounting processes.”