NOTICE OF AUDIT OF THE FISCAL AFFAIR OF THE CITY OF BIG STONE CITY
NOTICE OF AUDIT
OF THE FISCAL AFFAIR OF THE
CITY OF BIG STONE CITY
Notice is hereby given that the records and books of account of the City of Big Stone City, South Dakota, have been audited by Eide Bailly, LLP, Certified Public Accountants of Aberdeen, South Dakota for the two years ended December 31, 2020. A detailed report thereon, containing additional information, is filed with the City of Big Stone City and the Department of Legislative Audit in Pierre, South Dakota for public inspection.
The following findings and recommendations referred to in the report are hereby listed in accordance with the provisions of SDCL 4-11-12.
CURRENT AUDIT FINDINGS AND
RECOMMENDATIONS
Finding: City of Big Stone requested the external auditors to prepare the financial statements and related notes for the year ended December 31, 2020. As a part of the financial statement preparation process, we proposed audit adjustments that were not identified as a result of the City’s existing internal controls and, therefore, could result in a material misstatement of the City’s financial statements if not recorded.
Recommendation: This circumstance is not unusual in an organization of this size. It is the responsibility of management and those charged with governance to make the decision whether to accept the degree of risk associated with this condition because of cost or their considerations. Also, a thorough review of the transactions in each fund should take place prior to the beginning of the audit, to ensure that the modified cash basis of accounting has been followed for each fund type, especially for transaction types infrequent in occurence.
Views of Responsible Officials: Management agrees with the finding.
Finding: City of Big Stone City has a limited number of office personnel and, accordingly, does not have adequate internal accounting controls in revenue, expenditures, and payroll functions because of a lack of segregation of duties.
Recommendation: Although it is recognized that number of office staff may not be large enough to permit adequate segregation of duties in all respects, it is important that management and those charged with governance be aware of this condition. We recommend that the City Council exercise adequate oversight of the accounting function. In doing so, they should review financial data monthly including reports of monthly financial statements, budget-to-actual reports, monthly cash balances, monthly gross profit margins at the liquor store, and monthly bank statements or cancelled checks.
Views of Responsible Officials: Management agrees with the finding.
Finding:
• Regarding SDCL 43-41B-18, in 2020 and in 2019, the City did not properly report outstanding checks not cashed within one year of issuance.
• Regarding SDCL 9-18-1, the City did not properly publish the board minutes for 2 of the 12 meetings in 2019.
• Regarding SDCL 9-14-28, in 2020, the City did not properly fix and determine by ordinance or resolution the amounts of salaries and compensation of all municipal officers. The board did, however, approve the amounts, but not in the proper format.
• Regarding SDCL 9-22-21, in 2019, the City did not publish the annual report in the official newspaper.
• Regarding SDCL 9-22-2, in 2019 and 2020, the City adopted a budget that was not a balanced budget with expenditures exceeding revenues and did not have excess funds available in the general fund to balance the budget.
Recommendation: We recommend the City officials review the SDCL’s applicable to municipalities to become familiar with the statutory requirements and implement necessary controls and processes to ensure the compliance with those such laws. We also recommend that the city approve a balanced budget each year.
Views of Responsible Officials: Management agrees with the finding.
Russell A. Olson,
Auditor General
Department of Legislative Audit
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