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1983 Financial Statement BUREAU OF INSPECTION AND SUPERVISION OF l"UBLlC OFFICES REPORT OF EXAMINATIC)N CITY OF FA!RLAWN 20977-04-0427-00 SOUTHEAST REGION, DISTRICT 8 SUMMIT COUNTY REGULAR EXAMINATION MARCH 1, 1982 THROUGH DECEMBER 31, 1983 FISCAL YEAR AUDITED UNDER GAAS: 1983 THOMAS E. FERGUSON Auditor of State '~---'---_._..-""----~.~._--.~-_._~----._---,."-_._- -- ~I )-4754 (formerly Form 106) TO WHOM IT MAY CONCERN: Any person or persons examining this report for the purpose of obtaining information for the general public, as to the results of this examination, should: Always remember that it takes years for a person to build a reputation: ,. @-, Always remember that one of the purpõsês of these e~aminations is to safeguard the honest, well- meaning official who might have made a mistake, even as you and I; Always remember that a summary of findings, if any, as found in the body of this report, contains only the bare cold facts. Please read carefully the explan- atory material contained in this report for the precise description of the situations covered in the audit. .")0. Always remember that if this course is followed, the general public, which is served by the official, will receive an unprejudiced, unbiased report. Respectfully submitted, BUREAU OF INSPECTION AND SUPEFIVISION OF PUBLIC OFFICES - STATE OF OHIO ~ef1) ~ , THOMAS E. FERGUSON~ Chief Inspector . . CITY OF FAIRIAWN - SUMMIT COUNTY TABLE OF CONTENTS Title Elected and Appointed Officials Index of Funds Auditor's Opinion Combined Statement of Cash, Investments and Fund Cash Balances - All Fund Types Combined Statement of Cash Receipts, Disbursements and Changes in Fund Cash Balances - All Governmental Fund Types Combined Statement of Cash Receipts, Disbursements and Changes in Fund Cash Balances - All Fiduciary Fund Types Combined Statement of Receipts - Budget and Actual Combined Statement of Disbursements and Encumbrances Compared With Expenditure Authority Notes to Financial Statements Legal Compliance - Findings for Recovery Noncompliance Citations Status of Prior Audit's Findings, Citations and Recommendations Management Comments and Recommendations General Comments Conclusion Statement ,Examiner's Certification Page (i) (ii) 1 2- 2a' 3 4 ~....~ 5 6-14 15-17 17-19 20-20a 21-30 31 32 33 Elected Officials Ginnie Singleton Joel Weinstein Phyllis Martino Leonard Buser Floyd Holdsworth Peter Kostoff Gary Shaw Charles Walker Lawrence W. Pelland Appointed Officials James R. Graves Äubrey Bonifay Michael J. LaMonica .John Gemind Bernard Striegel Bernard Striegel Nicholas A. Spagnvolo Ray E. Hartung Philip J. Liambeis CITY OF FAIRLAWN - SUMMIT COUNTY ELECTED AND APPOINTED OFFICIALS Position Mayor Council Counci 1 Council Counc il Council Council Council Director of Finance Position Director of Law Director of Public Chief of Police Fire Chief Building Commission Zoning Inspector City Engineer Tax Administrator Recreation Director Safety (i) Term January 3, 1983 to December 31, 1983 February 4, 1983 to December 31, 1983 January 1, 1982 to December 31, 1983 January 1, 1982 to December 31, 1983 January 1, 1982 to December 31, 1983 January. 1, 1982 to December 31, 1983 January 1, 1982 to December 31, 1983 ~~. January 1, 1982 to December 31, 1983 January 1, 1982 to December 31, 1983 . . CITY OF FAIRLAWN - SUMMIT COUNTY INDEX OF FUNDS GOVERNMENTAL FUND TYPES General Fund Class: General Fund Special Revenue Fund Class: . Street Construction. Maintenance and Repair Fund State Highway Improvement Fund Motor Vehicle Tax Fund Income Tax Fund Federal Revenue Sharing Fund Recreation and Park Maintenance Fund Debt Service Fund Class: Debt Service Fund Capital Proiects Fund Class: Park Improvements Fund Sewer Improvements Fund Capital Improvements Fund FIDUCIARY FUND TYPES ~0"JI0. Agencv Funds Class: Agency Funds: Street Opening Bonds Miscellaneous Bonds (ii) EtJTY AUDITORS: JI' '~ES A. BOLDEN Administration (614) 466-3786 ~I'IARD G. NUSS CPA Auditing Division (614) 466-4971 . JSSELL L. ROUCH la'; ;gement Advisory , , Service (614) 466-2520 01 the STATE AUDITOR P.O. Box "40 I E. Broad Street 'Broa4 al Third iii~';olumbus. Ohio 43216.1140 lformation Line toll free 1-800-282-0370 THOMAS E. FERGUSON AUDITOR OF STATE COLUMBUS, OHIO 43216-1140 (614) 466-4514 Mr. Lawrence W. Pelland Director of Finance Members of Council City of Fairlawn Fair lawn , Ohio 44313 We have examined the Combined Statement of Cash, Investments aIlld Fund Cash Balances, and the rélated Combined Statements of Cash RecElipts, Disbursements and Changes in Fund Cash Balances, Statement of Receipts, Budget and Actual, and Statement of Disbursements and Encumbrances Compared With Expenditure Authority of the various funds of thEI City of Fairlawn, as listed in the foregoing Index of Funds, as of December 31, 1983, and for the year then ended. Our examination was made in accordance with generally accepted auditing standards and the Eitandards of the Auditor of State, 'and accordingly, included such tests clf the accounting records and such other auditing procedures as we considered necessary in the circumstances. .". As described in Note 2 to the financial statements, the city prepares its financial statements on the basis of cash receipts and disburse- ments; consequently., certain revenues and the related assets are recognized when received rather than when earned, and certain E!xpendi- tures or expenses are recognized when paid rather than when a liability is incurred. Accordingly, the accompanying financial statements are not intended to present financial position and results of oper~ttions in conformity with generally accepted accounting principles. As described in Note 1 to the financial statements, the city is required to encumber appropriations for certain liabilities, contracts nnd open purchase commitments. Certain of these commitments existed as of December 31, 1983, that were not recorded by the city. Had thE! City of Fairlawn properly encumbered, the effect would have been to increase "encumbrances" and to change the variances in the accompanying finan- cial statements by at least the amounts disclosed in Note 9. Although unrecorded cOlllllitments in addition to those disclosed in Note 9 may - exist, it was not practicable to fully determine the extent of unrecorded commitments beyond those amounts disclosed in Note 9. . . City of Fairlawn Summit County Page -2- As more fully described in Note 6 to the financiàl statements, the City of Fairlawn is a defendant in six legal actions. The ùltimate liability, if any, to the city cannot be reasonably determined at this time. In our opinion, except in the paragraphs noted above concerning encumbrances and pending litigation, the financial statements referred to above present fairly the combined cash, investments and fund cash balances of the various funds of the city, the related combined receipts, disbursements and changes in fund cash balances, budget and actual receipts, prior year carryover and current year appropriations, encumbrances, and disbursements, as of December 31, 1983, and for the year then ended, on the basis of accounting described in Note 1, which basis has been applied .in a manner consistent with that of the preceding year. 0Þ' (O0~ .;¡~ c:.. /:~ THOMAS E. FERGUSON Auditor of State July 11, 1984 CITY OF FAIRLAWN - SUMMIT COUNTY COMBINED STATEMENT OF CASH. INVESTMENTS AND FUND CASH BALANCES - ALL FUND TYPES AS OF DECEMBER 31. 1983 Cash Investments: Cash Equivalents Other Investments $ 85,379 1,416,536 (Cost) Tota 1 H.50l.9l5 CASH BALANCES BY FUND CLASS Governmental Funds General Fund Special Revenue Funds Debt Service Funds . Capital Projects Funds Special Assessment Funds (, " 458,024 . 131,844 89,141 812,859 Fiduciarv Funds .....~ Agency Funds 10.047 Tota 1 ~~1.501.915 The notes to the financial statements are an integral part of this statement. -1- ..,.~~ ~~ < ~u, ~~..~, ~-----r-- . . CITY OF FAIRLAWN - SUMMIT COUNTY . CCMBINED STATFMENT OF CASH RECEIPTS. DISBURSEMENTS AND CHANGES IN FUND CASH BAlANCES ALL GOVERNMENTAL FUND TYPES FOR THE YEAR ENDED DECEMBER 31. 1983 Governmental. Special Revenue. General Revenue Receipts: Property Taxes Municipal Income Taxes Other Local Taxes' State-Levied Shared Taxes Intergovernmental Receipts Charges for Services Fees, Licenses, Permits Interest Earnings Special Assessments Fines and Forfeits All Other Revenue Receipts $ 274,676 340,616 9,154 14,165 . 95,200 25.036 758,847 887,238 43,605 10,560 32,829 228,869 339,661 Tot~l Revenue Receipts Expenditure Disbursements: Security of Persons and Property Public Health and Welfare Leisure Time Activities Community Development Basic Utility Services Transportation General Government Capital Outlay Debt Service: Bond Principal Retirement Note Principal Retirement Interest and Fiscal Charges Total Expenditure Disbursements 1.542.762 Total Revenue Receipts Over/(Under) Expenditure Disbursements ( 783,915) $ 1,7'68,527 155,930 50,112 38 ,~.38 45,344 2,058,351 ,~ l41,O72 35,646 40,051 82,364 - 299.133 1,759,:n8 , Fund Tvpes Totals Debt Capital (Memorandum Service Pr01ects Only) $ $ $ 274,676 1,768,527 . 29,693 185,623 390,728 9,154 52,603 95,200 70.380 29,693 2,846,891 .,... 202,642 1,089,880 43,605 141,072 10,560 52,571 121,04€ 15,483 284 ,403 6,020 428,045 436,585 436,585 1.549 1.549 714.850 2.556.745 (685,157) 290,146 -2- rn. .,. . CITY OF FAIRLAWN - SUMMIT COUNTY .COMBINED STATFHENT OF CASH RECEIPTS. DISBURSEMENTS AND CHANGES IN FUND CASH BALANCES ALL GOVERNMENTAL FUND TYPES FOR THE YEAR ENDED DECEMBER 31. 1983 ( Continued) General Governmental Special Revenue, Other Financing Sources Proceeds of Bonds Proceeds of Notes Operating Transfers In Operating Transfers Out Other Financing Sources Other Financing Uses (Uses) 1,140,350 (2,080,250) 14,539 Total Financing Sources (Uses) 1. 154 . 889 (2.080.22.Q) Excess of Receipts and Other Sources Over/(Under) Disbursements and Other Uses 370,974 ( 321,032) ,,,," 87.050 452.876 $ 458.024 $ 131.844 Fund Cash Balance, January 1 Fund Cash Balance, December 31 The notes to the financial statements are an integral part of this statement. Fund Tvpes Debt Service Capital Proiects Totals (Memorandum On1v) .. 300,000 1,180,500 ( 240,600) 3,614 300,000 2,320,850 (2,320,850) 18,153 1.243,514 318.153 558,357 608,299 .."Iro. 89 .141 254.502 883.569 $ 89.141 $ 812 .859 $ 1.491. 868 -2a- f . . CITY OF FAIRIAWN - SUMMIT COUNTY COMBINED STATEMENT OF CASH RECEIPTS. DISBURSEMENTS AND CHANGES IN FUND CASH BAIANCES . ALL FIDUCIARY FUND TYPES FOR THE YEAR ENDED DECEMBER 31. 1983 Fiduciary Fund Type Agencv Totals (Memorandum Onlv) Operating Receipts Total Operating. Receipts $ $ Operating Disbursements Total Operating Disbursements Excess of Cash Operating Receipts Overt (Under) Operating Disbursements Nonoperating ReceiPts (Disbursements) Interest Note and Bond Proceeds Note and Bond Retirement Interest Expense and Fiscal Charges Other Nonoperating Receipts Other Nonoperating (Disbursements) .,"!II.. 4,675 4,675 ( 8.500) ( 8.500) ( 3.825) .t 3.825) ( 3.825) ( 3.825) ( 3,825) ( 3,825) 13.872 13.872 $ 10,047 $ 10,047 Total Nonoperating Receipts (Disbursements) Excess of Cash Operating Receipts Overt (Under) Disbursements Before Interfund Transfers Net Excess of Cash Receipts Over/(Under) Disbursements Residual Equity/Fund Balance, January 1 Residual Equity/Fund Balance, December 31 The-notes to the financial statements are an integral part of this statement. , -3- CITY OF FAIR.LA.WN - SUMMIT COUNTY COMBINED STATEMENT OF RECEIPTS - BUDGET AND ACTUAL FOR THE YEAR ENDED DECEMBER 31. 1983 Fund Tvpes/Funds Governmental Fund Tvpes General Fund Special Revenue Funds Debt Service Fund Capital Projects Fund Special Assessments Fund Fiduciarv Fund Tvpes Agency Fund Total (Memorandum Only) Budget Actual Variance: Favorable (Unfavorab le) $ 441,476 349,555 $ 1,472 ,260 1,708,796 $ 1,913,736 2,058,351 779,858 ( 1.825) 733,949 1,513,8Q7 $ 1.569.064 ...-... The notes to the financial statements are an integral part of this statement. 6.500 $ 3.921.505 4.675 $ 5.490.569 -4- .. . CITY OF FAIRLAWN - SUMMIT COUNTY COMBINED STATEMENT OF DISBURSEMENTS AND ENCUMBRANCES COMPARED WITH EXPENDITURE AUTHORITY FOR THE YÉÅR ENDED DECEMBER 31. 1983 Fund Types/Funds Governmental Fund Types General Fund Special Revenue Funds Debt Service Funds Capital Projects Funds Special Assessment Funds Fiduciary Fund Types Agency Funds Total (Memorandum Only) Prior Year Carryover Appropriations $ $ 1983 Appropriations $ 1,566,455 334,837 645,025 23.40Ò $ 2.569.717 Total $ 1,566,455 3~4,837 645,025 23.400 $ 2.569.717 "'"" The notes to the financial statements are an integral part of this statement. ~. Encumbrances Variance: Actual 1983 Outstanding Favorable Disbursements at 12-31-83 Total (.!l!!favorab1e) $ 1,542,762 $ 15,594 $ 1,558,356 $ 8,099 2,379,383 10,951 2,390,334 (2,055,497) 955,450 64,884 1,020,334 ( 375,309) 8.500 $ 4.886.095 341 8.841 $ 4.977.865 14.559 $i2.,408.148) $ 91.770 .,~. -5- . ~ þ iO . 1. CITY OF FAIRLAWN - SUMMIT COUNTY NOTES TO FINANCIAL STATEMENTS DECEMBER 31. 1983 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (As Requirèd by Various Statutes) A. DESCRIPTION OF THE ENTITY The City of Fairlawn was organized in 1972 and is a home rule municipal corporation under the laws of the State of Ohio. The city ¡Dperates under a council-mayor form of government and provides the f'Dllowing service.s as authorized by its charters: public safety, 'public services, health, recreation and development. Education services are provided by Copley-Fair lawn City School District. The district is a separate governmental entity and its financial statements are not included in these financial statements. . B. BASIS OF ACCOUNTING The city prepares its financial statements on a basis of cash receipts and disbursements; consequently, certain revenues and the related assets are recognized when received rather than when earned, and certain expenditures are recognized when paid rather than when the. obligation is incurred. A general fixed asset group and long-term debt group of accounts are not recorded on the financial statements by c~e city under the basis of accounting used. By virtue of Ohio law, the city is required to maintain the encumbrance method of accounting and to make appropriations. c. INVES1MENTS AND INACTIVE FUNDS Investments procedures are restricted by the provisions of the Revised Code. Purchased investments are valued at cost and are neither charged when purchased nor credited at the time of redemption to their respec- tive fund balances. Interest earned is recognized and recorded when received. D. FUND ACCOUNTING The city maintains its accounting in accordance with the principles of "fund" accounting. Fund accounting is a concept developed to meet the needs of government entities in which legal or other restraints require the recording of specific receipts and disbursements. The transactions of each fund are reflected in a self-balancing group of accounts, an accounting entity which stands separate from the activities reported in other funds. The restrictions associa~ed with each class of funds are as follows: -6- CITY OF FAIRLAWN - SUMMIT COUNTY NOTES TO FINANCIAL STATEMENTS DECEMBER 31. 1983 (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (As Required by Various Statutes) D. FUND ACCOUNTING (Continued) GOVERNMENTAL FUNDS General Fund The General Fund is the general operating fund of the city. to account for all financial resources except those requirE!d contract. to be accounted for in another fund. It is used by law or Special Revenue Funds The account for the proceeds of specific revenue sources (Clther than special assessments, expendable trusts or .major capital prcljects) that . are legally restricted to disbursements for specified purpc)ses. Debt Service Fund ","lb. To account for the accumulation of resources for, and the payment of, general long-term debt principal, interest and related costs. According to governmental accounting principles, the Debt Service Fund accounts' for the payment'of long-term debt for governmental funds only. Under Ohio law, the Debt Service Fund might also be used to account fer the payment of the long-term debt of proprietary funds and the short-term debt of both governmental and proprietary funds. For purposes of this report, these funds have been classified into the proper groups, if practicable. Capital Proiects Funds To account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by Special Assessment Funds. Proprietary Funds and Trust Fund:;). -7- . .. CITY OF FAIRLAWN - SUMMIT COUNTY NOTES TO FINANCIAL STATEMENTS DECEMBER 31. 1983 (Cont inued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (As Required by Various Statutes) D. FUND ACCOUNTING (Continued) PROPRIETARY FUNDS Enterprise Funds To account for operations (a) that are financed and operatE~d in a manner similar to private business enterprises - where the intent of the governing body is that the costs of providing .goods and services to thè general public on a. continuing basis be financed or rècovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, publi~ policy and management control, accountability or other purpose. Internal Service Funds To account for the financing of goods or services pròvide~.by one department or agency to other departments or agencies of the govern- mental unit, or to other governmental units, on a cost-rei~~bursement basis. FIDUCIARY FUNDS Agency Funds To account for assets held by a governmental unit in a tru!¡tee capacity or as an agent for individuals, private organizations, oth(~r govern- mental units, and/or other funds. These include Agency F~lds. E. BUDGETARY PROCESS 1. Budget A budget of estimated cash receipts and disbursements :Ls submitted to the county auditor, as secretary of the .county budg(~t commission, by July 20 of each year, for the. period January 1 to D(~cember 31 of the following year. -8- CITY OF FAIRLAWN - SUMMIT COUNTY NOTES TO FINANCIAL STATEMENTS DECEMBER 31. 1983 (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Co~tinued) (As Required by Various Statutes) E. BUDGETARY PROCESS (Continued) 2. Estimated Resources The county budget commission certifies its actions. to the city by September 1. As part of this certification, the city receives the official certificate of estimated resources which statl~s the projected receipts of ea.ch fund. On or about January 1, this certificate is amended to include any unencumbered balunces from the preceding year. Prior to December 31, the City of Fairlawn must revise its budget so that the total contemplated I~xpenditures . from a fund during the ensuing fiscal year will not eXI:e.ed the amount stated ~n the certificate of estimated resource:;. The revised budget then serves as the bas~s for the annual appropria- tion measure. Budget receipts as shown in the accompanying finan- cial statements do not include January 1, 1983 unencumbered fund balances. However, those fund balances are available for appro- priations. ,... 3. Appropriations A temporary. appropriation measure to control cash disbursements may be passed on or about Janua=y 1 of each year for the p,=!'iod January 1 to March 31. An annual appropriation measure must b,= passed by April 1 of each year for the period January 1 to December 31. The appropriations measure may be amended or supplemented during the year as new information becomes available. Appropriations may not exceed estimated resources. 4. Encumbrances The city is required to use the encumbrance method of i51ccounting by virtue of Ohio law. Under this system, purchase orders, contracts and other commitments for the expenditure of funds are recorded in order to reserve the portion of the applic;51ble appropriation. -9- . ! .. 1. CITY OF FAIRLAWN - SUMMIT COUNTY NOTES TO FINANCIAL STATEMENTS DECEMBER 31. 1983 (Continued) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (As Required by Various Statutes) E. BUDGETARY PROCESS (Continued) 4. Encumbrances (Continued) At the close of each fiscal year, the unencumbered ba1a11ce of each appropriation reverts to the respective fund from which it was appropriated and becomes subject to future appropriatioltls. The encumbered appropriation balance is carried forward to the su"cceed- ing fiscal year and need not be reappropriated. F. PROPERTY. PLANT AND EQUHMENT Fixed assets acquired or constructed for general government,a1 service are recorded as expenditures. Depreciation is not recorded for these fixed "assets. G. ACCUMULATED UNPAID VACATION, PERSONAL LEAVE AND SICK PAY .,..... Accumulated unpaid vacation, personal leave and sick pay are not accrued under the cash basis of accounting described in Note 1. At December 31, 1983, management estimates that $ -0- in personal leave, $86,638 in sick leave and $16,049 in vacation leave has been accumulated by the employees of the city. All leave will either be absorbed by time off from work, or within certain limitations, be paid to the employees. It is not practicable to determine the actua¡;ia1 value of these benefits as of December 31, 1983. H. TOTAL COLUMNS ON FINANCIAL "STATEMENTS Total columns on the financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. This data is not comparable to a consolidation. Interfund- type eliminations have not been made in the aggregation of this data. -10- CITY OF FAIRLAWN - SUMMIT COUNTY NOTES TO FINANCIAL STATEMENTS DECEMBER 31. 1983 (Continued) 2. DEBT OBLIGATIONS Debt outstanding at December 31, 1983, consisted of the followi.ng: General Obligation Notes Principal Outstanding Interest Rate $ 300,000 S.697. All outstanding notes at December 31 had been issued for one ye,ar or less. These notes were of the general obligation type and have not be,en renewed. Proceeds from the notes ~ere used to rehabilitate and improve the municipal buildings. The city will retire these three municipal building notes by Oc:tober 3, 1984, by paying these notes off in one lump sum. 3. PROPERTY TAX Real property taxes are levied on assessed values which equal:ilS7. of appraised value. The county auditor reappraises all real prope:rty every six years, with a triennial update. The last update was compl,:ted for tax year 1981. . Real property taxes become a lien on all nonexempt real property located iti the county on January 1. Real property taxes are payable annuELlly or semi- annually. If pai.d annually, payment is due December 31; if pai.d semiannually, the first payment is due December 31 with the remainder payable: by June 20 of the following year. Under certain circumstances, state statutes permit later payment dates to be established. The full tax rate applied to real property for the fiscal year ended December 31, 1983, was $2.70 per $1,000 of assessed value. After adjust- ment of the rate for inflationary increases in property values" the effective tax rate was $2.70 per $1,000 of assessed valuation for real property classified as residential/agricultural and $2.70 per $1,000 of assessed valuation for all other real property. Real property owners' tax bills are further reduced by homestead and rollback deductions, when applicable. The amount of these homestead and rollback reductions is reimbursed to the City of Fairlawn by the State of Ohio. -11- . ,. CITY OF FAIRLAWN - SUMMIT COUNTY NOTES TO FINANCIAL STATEMENTS DECEMBER 31. 1983 (Continued) 3. PROPERTY TAX (Continued) Owners of tangible personal property are required to file a lie:t of such' property, including costs, by ~pril 30 of each year. The prope~rty is assessed for tax purposes at varying statutory percentages of Clost. The tax rate applied to tangible personal property for the fiscal year December 31, 1983, was $2.70 per $1,000 of assessed valuation. Real Property - 1983 Valuation Public Utilities/Personal Property Real Estate Tax $ 2,830,550 87,628,890 Tangible Personal Property 9.615.082 $ 100.074.522 Total Valuation The Summit County Treasurer collects property tax on behalf of all taxing districts within the county. The Summit County Auditor periodically remits to the taxing districts their portions of the taxes collected.. 4. LOCAL INCOME TAX ......~ This locally levied tax of l~% applied to gross salaries, 'wage~~ and other personal service compensation 'earned by residents both in and out of the city, and to earnings of nonresidents (except certain transients) earned iI'. ':ne government. It also applies to net incot:le of business organi~ations conducted within the city. The tax receipts are credited to the Income Tax Fund and amounted to $1,768,526 in 1983. 5. INSURANCE The city maintains for real property, liability coverage comprehensive insurance coverage with private carriers building contents and vehicles. Vehicle policies include for bodily injury and property damage. 6. PENDING LITIGATION The city ia a defendant in six judgment substantial enough to - are decided in the plaintiff's lawsuits, three of which seek monetary be material to the General Fund if the favor. cases -12- CITY OF FAIRLAWN - SUMMIT COUNTY NOTES TO FINANCIAL STATEMENTS DECEMBER 31. 1983 ( Continued) 6. PENDING LITIGATION (Continued) In the first case, a former employee is pursuing a civil rights action and an award of $225,000 for damages. The second case is a citizen complaint directed at the police department for a total claim of $110,000 in damages. In the third of Akron, et Common Pleas case, a labor al, pending a Court. union is seeking $10,000,000 against: the City case now being considered by the Stm~it County Should judgment ultimately be for the indicated plaintiffs, thE! effect would be material to the General Fund. . 7. EMPLOYEES' DEFERRED COMPENSATION PROGRAM Employees of the city may elect to participate in an Employees' Deferred Compensation Program. Under this program, employees elect to have a portion of their pay deferred until a future time, usually after retir,~ment. The deferred pay and any income earned on it is not subject to in~~e taxation until actually received by the employee. As of June 30, 1983, funds on deposit with the Trans Ohio Savings Company,. Trustee, for the Employees' Deferred Compensation Program totaled $1,043. Under the terms of the deferred compensation plan agreement, these funds are the property of the city, although the amount is not refle.:ted in the accompanying financial statements. Also not reflected in such statements is a liability to the employees participating in the plan, equ¡al in amount to the funds on deposit. Participating employees are general I:reditors of the City of Fairlawnwith no preferential claim to the deferred funds. 8. RETIREMENT COMMITMENTS The employees of the city were covered by the Public Employees' Retirement System of Ohio. The State of Ohio accounts for the activities of the. retirement system and the amount of that fund is not reflected in the accompanying financial statements. As of December 31, 1983, the city - employees contributed 8.5% of their gross wages. The city matches this with a èontribution equal to 13.95% of employees' gross wages. The firemen and polïcemen of the city are covered by the Police and Firemen's Disability Pension Fund, also accounted for by the State of Ohio and also not reflected in the accompanying financial statements. -13- . .. CITY OF FAIRLAWN - SUMMIT COUNTY NOTES TO FINANCIAL STATEMENl'S DECEMBER 31. 1983 (Continued) 8. RETIREMENT COMMITMENTS (Continued) Policemen and firemen contribute 8.5% of their gross wages to and the city matches this with a contribution equal to 23.57% and 18.45% of policemen's gross wages. the plan clf firemen's 9. UNRECORDED PURCHASE COMMITMENTS The city expended funds in 1984 for purchase commitments made prior to December 31, 1983, and did not encumber such expenditures on their financial records. An analysis of 1984 expenditures revealed that unrecclrded purchase commitments as of December 31, 1983, were at least the' following amounts: General Fund Special Revenue Fund Capital Projects Fund Trust and Agency Fund $ 15,594 '10,950 64,884 341 Total All Fund Classes $- 91.769 Although additional unrecorded encumbrances to fully determine the extent of unrecorded described above. may exist, it was ,trot practicable encumbrances beyond the amounts 10. FEDERAL GRANTS (Intergovernmental Receipts) The Federal Revenue Sharing grant is aùdited by the Auditor of State as part of their regular examination. Any instances of noncompliance ~7ith Federal Revenue Sharing grant requirements and any expenditures that '[Jl¡;lY be disallowed and subject to reimbursement to the federal government are dis<:losed in this presentation in the section entitled "Legal Compliance". 11. LEGAL COMPLIANCE Pursuant to Section 117.09, Revised Code, the Auditor of State performed tests of compliance with various provisions of local, state and/or federal laws, as appropriate. The Auditor I s findings and citations arE~ included in a separate part of this presentation. Material adjustments with which the City of Fairlawn officials agree have been posted to the books of account - and such adjustments are reflected in the accompanying financiul statements. -14- >E, JTY AUDITORS: JI! '1ES A. BOLDEN Administration (614) 466-3786 ~I. -iARC G. NUSS CPA Auditing Division (614) 466-4971 . JSSELL L. ROUCH Ie gement Advisory . Service (614) 466-2520 ^" Offices of the STATE AUDITOR P.O. Box 1140 I E. Broad Street . , Broad at Third ,:Olumbus, Ohio 43216.1140 ,formation Line toll free 1-800-2B2-0370 THOMAS E. FERGUSON AUDITOR OF STATE COLUMBUS, OHIO 43216-'140 (614) 466-4514 Mr. Lawrence W. Pelland Director of Finance Members of Council City of Fairlawn Fairlawn, Ohio 44313 Re: Legal Compliance We have examined the combined financial statements of the variou.s funds, as listed in the Index of Funds, of the City of Fairlawn, Ohio, as of December 31, 1983, and have issued our audit report thereon date:d July 11., 1984. Our examination was made in accordance with gene:rally accepted auditing standards and the Auditor of State's standardsl,.and accordingly, included sùch tests of the accounting records and s:uch other auditing procedures as we considered necessary in the circ:um- stances. In the course of our examination,we (It performed tests of co~!liance with the Revenue Sharing Act and Regulations as detailed in the Commentary on the Audit ReQuirements of the 1980 Amendments to t~e State and Local Fiscal Assistance Act issued by the Office of Re:venue Sharing, United States Department of the Treasury, and (2) compslred the data on the annual city and village financial report OH-2 fClr use in the general Revenue Sharing program with the unaudited 1982 records of the city. Material citations are set forth below in the section entitled "Federal Revenue Sharing". For the period March 3. 1982 through December 31. 1983, we perfclrmed tests of compliance with various provisions of state statutes, regula- tions and case law. and applicable local authority, if any. Material findings and citations are set forth below. -15- . ,. City of Fairlawn Swmnit County. Page -2- Findings ,for Recoverv 1. A review of rental monies received through the park and recreation department was conducted for the audit period;. This review reflected that some rental monies had been receipted but had I1.ot been deposited to the treasurer of the city. Mr. Philip Liambeis, Recreation Director of the City of Fairlawn, was responsible for making all deposits to the treasury of the city. Based on the foregoing facts, a finding for recovery is hereby' returned. against Mr. Philip Liambeis, Recreation Director, and the Allstate Insurance Company, his bonding company, jointly and severally, in the amount of seventy-two dollars and fifty cents ($72.50), in favor of the treasury of the City of Fairlawn. 2, A review of the park and recreation department collections was con- ducted for programs and activities held during 1983. This rev'iew revealed that on numerous occasions monies were deposited into, the treasury of the city without being properly receipted by the recreation director; In addition, on some occasions, documentation in the form of leftover tickets was not in evidence to support the claim that tickets were not sold~ The following is a list of programs where documentation in the form of leftover tickets were not in eVj,9,ence to support the claim that tickets were not sold. Number of Total Cost Number of Number of Number of 'Tickets of Tickets Tickets Tickets Tickets Not In Total Cost Not In Event . Purchased Sold Leftover Evidence per Ticket Evidence "Annie 11 Front Row Theater 40 7 13 20 $ 9.68 $ 193.60 Blossom Music No record Center 40 of this 20 20 8.00 160.00 Cleveland Indians 55 12 7 36 7.50 270.00 Kep.ley Players 40 5 10 25 8.00 200.00 Total $ 823.60 -16- City of Fairlawn Suunnit County Page -3- 2. (Continued) Mr. Philip Liambeis, Recreation Director was responsible for maintaining programs the park and recreation department. of ehe City of Fairlawn, and activity records for Based on the foregoing facts, a finding for recovery is hereby returned against Mr. Liambeis, Recreation Director, and tbe Allstate Insurance Company, his bonding company, jointly ~nd severally, in tbe amount of eight hundred and twenty-tbree dollars and sixty cents ($823.60), and in favor of tbe treasury of the City of Fairlawn. Noncompliance Citations Revised Code 1. Contrary to Section 117.17, the city were not deposited within twenty-four bours. Revised Code, all monies received by to tbe treasurer of taxing district 2. Contrary to Section 5705.4l(D), Revis~d Code, funds were ex~~pded prior to being certified by the fiscal officer. The fiscal officer must certify that tbe amount required to meet such a commitment has been lawfully appropriated and is in the treasury or in tbe process .of collection to tbe credit of an appropriate fund free from any previous encumbrances. 3. Contrary to Section 117.06, Revised Code, tbe city did not fu.lly disclose all 1983 interest earned on their 1983 Annual Financial Statement. A total of $41,879 in interest earnings recorded by the bank in 1983 was not posted to the casbbook in 1983 or recorded on the 1983 annual financial statement. 4. Contrary to Section 135.18, Revised Code, interim funds wbich deposited åt BancObio National Bank were not covered by a depository contract. were 5. The General Fund was found to have appropriations in excess of the amount certified as available by the budget commission, contrary to Sections 5705.36 and 5705.39, Revised Code. The city could have obtained an amended certificate in an amount greater than total fund appropriations. -17- . . City of Fairl~wn Summit County Page -4- 6. Section 5705.41(B), Revised Code, prohibits a subdivision from making an expenditure unless it has been properly appropriated. The county municipal motor vehicle tax, the ~unicipal income tax and the Capital Projects Funds were found to have expendi- tureswhich exceeded appropriations. 7. The State Highway Improvement Fund appropriation was exceeded by the sum of its respective expenditures and encumbrances, contrary to Sections 5705.41(D) and 570S.4l(B), Revised Code. 8. As of January 1, 1983, the County Municipal Motor Vehicle Tax Fund had a negative cash balance of $50,660. This is in violation of Section 5705.10, Revised Code. The deficit balance indicates that cash from another fund has been used "to pay the obligations of this fund. 9. Contrary to Section 145.03, Revised Code, no Public Employees' Retirement System was deducted from the wages of one service employee, although he did not meet any of the exemption requirements. 10. Contrary to Ohio Attorney General Opinion 65-107 under Sectio,n 733.46, Revised Code," proceeds derived from the use of a vemiing machine in the fire department were not deposited in the Gene,ra1 Fund of the City of Fairlawn. The proceeds were deposited to, the Firemen's Association. Fed~ Revenue Sharing 1. 31 CFR Section 51.45 (October 30, 1981) requires that entit1e,- ment funds be expended in accordance with the law applicable to all other revenue of the City of Fair1awn. In one respect, the city had not complied with this section: Some commitments for encumbered, contrary Code. Revenue Sharing money were not to Section 570S.41(D), Revised 2. 31 CFR Section 51.12(c) (October 30,1981), requires that the~ recipient government publish a notice of availability of the actual use report in a newspaper of general circulation. The~ city did not comply with this requirement for the year 1983. -18- r , City of Fairlawn Summit County Page -5- In our opinion, for the items tested, the city (1) complied with. the aforementioned provisions of the Revenue Sharing Act and Regulations, and (2) complied with the tested provisions of state statutes, regulations and case law, exc~pt as noted above. Further, based upon our examination, nothing came to our attenti.on to indicate that the city had not complied with the requirementfi thereof for the untested items. July 11, 1984 -19- 5à-- ¿.9'~ THOMAS E. FERGUSON Auditor of State ":~~ CITY OF FAIRLAWN - SUMMIT COUNTY . . STATUS OF PRIOR FINDINGS. CITATIONS AND RECOMMENDATIONS Findings for Recoverv Against Mr. Steven Youngblood, Recreation Director, for shortages of monies from programs and activities held during 1981 ($199.10). Citations - Revised Code 1. Contrary to Section 5705.41(B), Revised Code, funds had been expended in excess of the amounts appropriated in the Income Tax Special Assessment Bond Retirement, Capital Improvements, Street Opening Bonds and miscellaneous trust funds. 2. Contrary to Section 5705.41(0), Revised Code, expenditures were made prior to certification of funds. 3. Contrary to Section 5705.10, Revised Code, interest earned on investments was not distributed on a prorata basis based on fund balances at the time the investment was made. 4. Contrary to Section 117.17, Revised Code, not all revenue was deposited to the city treasury within a twenty-four hour period. Status During the audit period, Mr. Youngblood paid back the full amount into the city treasu~y. Citations 1 and 2 have been reissued for the year 1983. This citation was found to be not applicable during this audit period. This citation is being re~ssued in this audit. Funds are not t being deposited in accordance with this section. Exp1~nation If Not Fu11v Implemented N~ No explanation was given for the recurrence of these budgetary violations. N~' The situation was not addresse by the finance department of the City of Fair1awn. Citations -Federal Revenue Sharing 1. Contrary to Subpart F, Section 51.l0Q(c), Revenue Sharing Regulations, entitlement funds were not encumbered according to the provisions of Section 5705.4l(D), Revised Code. Recommendations 1. Receipts should be written for all collec- tions received by the various departmen~s. I ~ C) I 2. Each department should maintain a cashbook listing all receipts issued for monies collected and deposited into city treasury. 3. The finance director should prepare a list of all outstanding checks .over six months of age and issue a stop payment order on these checks. The applicable funds .Jhould then be credited for the proper amounts. 4. Payroll checks should be distributed by personnel not involved with payroll ,repara- tion. Those involved with the distribution duty should be rotated from time to time. 5. All outstanding cash or change funds should be turned in to the finance department at year end by the custodian for inventory and accountability purposes. r,o: '\i}:~:';~'!i' The citation is being reissued in this audit for noncompliance. Receipts the city audit. are being written by as of the end of the No progress, recommendation reissued. . No progress, recommendation reissued. Not im~lemented during the audit period. Not implemented during the audit period. . ( Recurring budgetary violation that the finance department has been unable to correct. NM No explanation given for not implementing. No explanation given for not implementing. Due to size restrictions of the .,main office, it was determined not feasible to implement. Not considered material to the operation of the entity. CITY OF FAIRLAWN - SUMMIT COUNTY STATUS OF PRIOR FINDINGS, CITATIONS AND RECOMMENDATIONS (Continued) Recommendations (Continued) Explanation If Not Fullv Implemented Status 1'<' "'.~".,",. ~ . . 6, There should be surprise cash counts of petty cash funds. Not implemented during the audit period. Immaterial to the operation of the entity. 7. Mail should be opened by a person having no other accounting functions. Not implemented during the audit period. Size restrictions implementation of recommendation. I ~ 0 ø I 8. A timely list of receipts should be prepared by the person opening the mail. Not implemented during the audit period. Size restrictions implementation of . recommendation. . , limit the this limit the this E JTY AUDITORS: J,I"1ES A. BOLDEN Administration (614) 466-3786 ~I -lARD G. NUSS CPA Audhing Division (614) 466-4971 . JSSELL L. ROUCH a . . 'gement Advisory . Service (614) 466-2520 of1he STATE AUOITOR P.O. Box 1140 \ E. Broad Stree1 ~~3road at Third ." :;Qlumbus. Ohio 43216.1140 ¡(ormation Line toll free 1-800-282-Q370 THOMAS E. FERGUSON AUDITOR OF STATE COLUMBUS, OHIO 43216-1140 (614) 466-4514 Mr. Larry Pelland Director of Finance Members of Council City of Fairlawn FairlaWn, Ohio 44313 Re: Manàgement Comments and Recommendations We have examined the financial statements of thé City of Fairlæwn for the year ended December 31, 1983, and have issued our report thereon dated July 11, 1984. As part of our examination, we made a study and evaluation of the system of internal control of the City of Fairlawn to the extent we considered necessary to evaluate the system as required by generally accepted auditing standards and the standards for financial and compliance audits contained in the Standards for Audits of Ohio Governmental Entities by the Auditor of State. For the purpose of this report , we have classified the significant internal accounting controls in the following cate~ories. A. Cash and Cash Equivalents Balances 1. Reconciliation 2. Petty Cash 3. Cash Equival~nt Inv""stments B. Investment Balances 1. Non-Cash Equivalents Investments C. Cash Activity 1. Receipts 2. Disbursements (a) Purchasing (b) Payroll and Receiving D. Budgetary Balances and Activity E. Debt Balances and Activity Invento~y Balances and Activity F. G. Property and Equipment Balances and Activity H. Other -21- . . City of Fairlawn Summit County Page -2- Our study included all of the control categories listed above. The purpose of our study and evaluation WaS to determine the nature, timing and extent of performing the auditing proc~dures necessary' for expressing an opinion on the entities financial statements. Our study and evaluation was more limited than would be necessary to express an opinion on the system' of internal accounting control as a whole or on any of the categories or controls identified above. The management of the city is responsible for establishing and main- taining a system of internal accounting control. In fulfilling this responsibility, estimates and judgments by management are require:d to assess the expected benefits and related costs of control procedu.res. . The objectives of a system are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in acc:or- dance with the basis of accounting prescribed by the Auditor of State. Because of inherent limitations in any system of internal accounting control, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the system to . -~ future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the degree of' compliance with the procedures may deteriorate. Our study and evaluation made for the limited purpose described in the first ?aragraph would not necessarily disclose all material -.reEik.1lesses in the system. Accordingly, we do not express an opinion on the system of internal accounting control of the city taken as a whole. However, our study and evaluation disclosed the following conditi.ons that we believe result in more than a relatively low risk that et'rors or irregularities in amounts that would be material in relation to the financial statements of the city may occur and not be detecte:d within a timely per.iod. -22- City of Fairlawn SUIIDIlit County Page -3- Cash Balances Reconci lia tion In reviewing reconciliation procedures used in the city,we noted on numerous occasions that interest earned from investments was not recorded to financial records on a timely basis. The cash recon" ciliation did not always reflect all interest earned. In some instances, interest earned was not duly recorded for a one year period. To strengthen control over the recording of interest to financial records: 1. The office statements bank. manager should prepare the monthly reconciliation to reflect all interest earned as stated by the Investment Activitv Investment Documentation - ~~ We reviewed investment procedures used by the city and determined that the present investment register did not sufficiently document investment activity which occurred. In addition, an investment passbook issued by th~ bank to support investments made was not i.n evidence on several occasions. To strengthen control over the documentation of investments withi.n the city: 1. A continuous register which clearly reflects the specifics of each individual investment should be maintained. This register should indicate the type of investment, the amount, identification number, term of investment, interest earned, the receipt number interest was posted on and the status of the investment. 2. All passbook identification books or material issued by the bank to document investments should be maintained. -23- . . City of Fairlawn Summit County Page -4- Cash Disbursements Income Tax Refund Account In reviewing cash disbursement procedures of the city, it was not:ed that an income tax refund account was maintained separately from other city accounts. Disbursements from this account were approv.ed by the signature of the finance director and assistant finance director. City council did not review any expenditures from this account. To strengthen internal control in the disbursement of income tax refunds: 1. Authorization of city council execution of a refund. These in the minute record. should be obtained prior to the. refunds should b.e duly recorded 2. Consideration should be given to eliminating the separate tax. refund account and refunding monies through the regular general corporation accounts~ . Authorization Procedures ~~r In reviewing expenditures of the city, it was noted on numerous occasions that vouchers were issued prior to approval by city council. Further inquiry revealed that this was a regular procedure. To strengthen internal control in the area of voucher authorization: 1. City council should consider reviewing authorization procedures for the expenditure of city funds to determine how disbursements can be made on a timely and uniform manner. Budgetarv Fund Grouping In the analysis of the budgetary process of the City ~f Fair lawn , it was noted that the capital projects account group was budgeted in tðtal. Within this account group, three funds are currently being maintained. -24- City of Fairlawn Summit County Page -5- Fund Grouping (Continued) Government accounting concepts dictate that each fund is a separate and distinct entity, with each containing a set of self-balancing accounts. These accounts record the sources and uses of the particular entity. This independence exists for all funds within the governmental unit. To strengthen internal control within the budgetary area: 1. Each fund within any account group should be budgeted on an individual basis. The practice is consistent with proper governmental accounting procedure as well as aiding manage- ment in better controlling the activities of any fund. In addition, overall accountability of the financial system is strengthened. Inventorv Balances Annual Inventorv In reviewing inventory procedures of the city, it was determined - -~ that inventory records were maintained on an irregular basis. In one case, the parks and recreation department had not made a formal inventory list for nine years. To strengthen internal control in the inventory area: 1. Each department should make and property. All items on for insurance purposes. an annual list of all assets this list should be costed out We also noted other conditions that we regarded as weaknesses in the city's system of internal accounting control. While 'we do not consider these conditions as material weaknesses, they are neverthe- less potential sources of errors or irregularities. Cash Balances Reconciliation - Income Tax Refund Account ~n reviewing reconciliation procedures of the city, it was that some checks in the income tax refund account had been on the outstanding check list for over two years. determined maintained -25- . . City of Fairlawn Summit County Page -6- Reconciliation - Income Tax Refund Account (Continued) To strengthen internal control in the reconciliation of the income tax refund account: 1. Stale outstanding checks over six months reentered on the financial records after made with the individual check holders. old should be proper contact is Cash Activitv Park Receipts for Ticket Revenue A review of receipting procedures in the city's park and recreation department was performed and it was determined that duplicate receipt books for ticket sales were. not prenumbered. To strengt4en internal control in the receipting of ticket revenue in the parks and recreation department: 1. All duplicate receipt books for revenue from the sale of tickets should be prenumbered for accountability. "'~. Rental Receipts In reviewing rental receipting procedures in the city's parks and recreation department, it was determined that rental revenue was not fully documented on a regular basis. In addition, the parks and recreation department did not receipt all rental revenue on duplicate receipts. To strengthen internal control in documentation of rental revenue: 1. All rental activity of the parks and recreation department should be fully documented on a monthly basis. A monthly report detailing dates and times property was rented and the fees charged should be presented to city council with all pertinent duplicate receipts attached. Consideration should be given to establish a public calendar to show all events scheduled by the city. -26- City of Fairlawn Summit County Page -7- Cash Activitv (Continued) Vending Machine Revenue A review of receipting procedures for vending machines revenue in the City of Fairlawn was performed and it was determined that receipts and disbursements of this kind were not thoroughly docu.. mented, nor were profits made clearly defined. The parks and recreation department was responsible for all vending machines. To strengthen internal control in the area of vending machine revenue: 1. The parks and recreation department should thoroughly account: for all vending machine activity on a monthly basis. All rec~ipts, expenditures and deposits to the city treasury should be noted for each vending machine in a written report for council review. . . Ticket Sale Revenue A review of the receipting procedures in the City of Fairlawn's Parks and Recreation Department for tickët sales to special eveiÌt:s was performed. It was determined, on numerous occasions, that the documentation for these special events was not sufficient to support expenditures made by ~he city. Ie str~mgthen internal control in th'2 ticket sales rece:.t>ting 3re,a~ 1. The parks and recreation department should account for all activity concerning the purchase and sale of tickets for special events on a trip by trip basis. Each trip should be fully documented and should specify the number of tickets purchased, the number sold, the number of persons who attende~d the function and the amount of revenue taken in. All applicEI- ble receipts and extra tickets should be attached to the repclrt. -27- . City of Fairlawn SwmnitCounty Page -8- Inventorv Balances Tagging of Inventorv A review of the inventory procedures of the city was performed and it was determined that there were several instances in all departments in which items were not properly tagged for identification purposes. To strengthen internal control in the area of inventory accou~tability: 1. All items of significant value identification and tag numbers inventory lists. should be tagged for proper should be properly recorded on Vehicle Title A review of all city vehicles and truck titles was was determined that there were instances where the produce titles to its vehicles and trucks. performed and it city was unable to To strengthen internal control of all titles to the City of Fairlawn's vehicles and trucks: ..,~. 1. All titles, certificates of origin, and/or governmental certifi- cates of purchase should be maintained by the administrative department of the City of Fa~rlawn. 2. The adm:.nistrati-¡~ office of the City of Fairlawn should trallsfer all certificates of origin and governmental certificates of purchase to titles and maintain these on file in the administrative department. Other Hospitalization Insurance A review of hospitalization insurance payments made by the city ~as performed and it was determined that insurance rates for the city. employees had increased markedly in the last two years, although the city had retained the same insurance company for more than five y,ears. -28- City of Fairlawn Summit County Page - 9- Hospitalization Insurance (Continued) To strengthen internal control in the area of insurance payments:: 1. Consideration should be given to bidding for hospitalization insurance in order to insure that the city obtains the most competitive rates available. Minute Records A review of minute records was performed for the City of FairlawIl and it was determined that the specifics of fund transfers and changes in employee compensation were not detailed in the minute re.cords. To strengthen internal control in the recording of city transac- tions in the minute records: 1. Tbe details of fund transfers and changes in employee compem¡a- tion should be made a part of the minute records. Filing Contracts and Agreements .~w In reviewing contracts for the city, it was determined that some written contracts and agreements were not in evidence in the general offices. To str'i!ngthen internal control in the are::! of cC'n':::.&ctußl doC'umentF- tion: 1. Copies of all written contracts should be maintained in the general offices to provide sufficient documentation of agree.. ments entered into by the city. Deferred Compensation Plan In reviewing bank accounts maintained by the city, it was noted that the city established a deferred compensation plan for its emploYE!es and officials through a local bank in late 1983. Documentation to support deferred balances and interest accumulation was not sufficient. -29- . City of Fairlawn Summit County Page -10- Other (Continued) Deferred Compensation Plan (Continued) To strengthen internal control in the employee deferred compensation plan: 1. The city, as contractual record holder of employee deferred compensation accounts, should maintain a thorough record of these a~counts even though the actual monies belong to its employees. Contracts In reviewing various contractual agreements within the city, it~7as noted that contracts were not established f.or payment of the juvEmile officer from adjoining communities and for the maintenance of fire hydrants by the Fire and Rescue Association in 1983. To strengthen internal control in the area of contracts: 1. Formal written contracts should be established for the payment agreement between adjoining entities for the service of the'''". juvenile officer and for the maintenance of fire hydrants by the Fire and Rescue Association. ~¿ý'~ THOMAS E. FERGUSON Auditor of State July 11, 1984 -30- CITY OF FAIRUWN - SUMMIT COUNTY GENERAL CG1MENTS Although the accompanying financial statements reflect activity and balances through December ~l, 1983, the Auditor of State's office conducted a cash count on May 7, 1984. Limited audit procedures also were conducted up to this date and such procedures are reflected in the audit working papers. While the city's records were generally well maintained, there wer'~ some problems encountered in performing our examination, as evidenced i1:1 the preceding noncompliance section. Particular problems arose in reviewing budgetary compliance as well as investment activity and the recogn:ltion of interest earned. These items,along with weaknesses in depàrtml~ntal collections noted in management'comments and reconunendations extended our examination approximately eighty hours over the original budget. The city personnel were generally cooperative and available for qu,estions and assistance during regular working hours. ...,~. -31- 7, .J. :~ . . CITY OF FAIRLAWN - SUMMIT COUNTY CONCLUSION STATEMENT The audit report, including recoImIlendations and cit;ations, was reviewed with and acknowledged by the following officials on July 11, 1984: Larry Pe Uand Ray Hartung Floyd Holdsworth William F. Stalker Peter M. Kostoff Stanley Bielewicz James R. Graves Philip Liambeis Finance Director Assistant Finance Director Counci 1 Council Council Counci 1 Law Director Park and Recreation Director These officials were informed that they had five days from the date of the post audit conference to respond to, or contest in writing, the citations made. No such written response was received. ~~. -32- - ~ ---~----'- 0 . . r" .) l'OfIIw'. EXAMINER CERTIPICATION lie tb. lUUIet.igned _by certify .bat -. hav. 0XGDIiJ1ed lb. book.. reccoda and aec:ounta of the within nalØd. Ci t.v of FairlaWl1 SUlllmit CoW1!y, enol . -, furtber certify !bat !be we, Y8rily an.W. foNgoiDfj b'a true GIld aecœat..ummat1OD of the ICUDe'CItI BUREAU OF INSPECTION AIID SUPERVISION OF7Z7Z2:0~. S~. :2 .~~) ~ S/t- EJ:CDDÙ1er ¿~ ~ /¡1~~ State Examiner TYPIST' CIRTI1IICATION I -y certify !bot !be fcre<¡Oill9 cepart Ie 0 true enoIc...... oopy 01 lb. origi...¡ report 01 !be ...._... 01 soiil.cøiog cIIstrlct. . cm+\~':'-~'\1r _~;flSi. - . . ~ ~ .. ~.;..-;__...h, BUREAU CERTIFICATION A true and. ccrrect: CQPY of this report - is filed in the Offices of the Bureau of - IaspeCtion cmd SUpeM.sion of Public Offices at Columbus, Obla. THE BUREAU OF INSPECTION AND SUPERVISION OF PUBLIC OFFICES BY¿)~Øk.~ Clerk Dat.: \1 J MI 19ß5 -33- - """'<~',-,,~_.-'..,-, ~"-'~"'"",.-",,,,_.,,'-v._~m, < ."."---".,-.,.,,.~~..,.+ "-'~-~-.'.,-"",,,~,,"-'-"-'-'-"'-"'-' - ~. .....,""....~ ~, ,..