2002CITY OF BANGOR, MAINE
Letter of Recommendations to Management
June 30, 2002
CERTIFIED PUBLIC ACCOUNTANTS
AND BUSINESS CONSULTANTS
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O14ellette Certified Public Accountants and Business Consultants
October 10, 2002
To the Bangor City Council
City of.Bangor, Maine
In planning and performing our audit of the financial statements of the City of Bangor for the year ended
June 30, 2002, we considered its internal control in order to determine our auditing procedures for the.
purpose of expressing our opinion on the financial statements and not to provide assurance on the
internal control. However, we noted a certain matter involving the.internal control and its operation that
we consider to be a reportable condition under standards established by the American Institute of .
Certified Public Accountants.. Reportable conditions-involve.matters coming to our attention relating to
significant deficiencies in the design or operation of the internal control that, in our judgment, could
. adversely affect the City of Bangor's ability to record, process, summarize, and report financial data
consistent with the assertions of management in the financial statements. We have noted one reportable
condition below.
Our consideration of the internal control structure would not necessarily disclose all matters in the
internal control structure that might be material'weaknesses under standards'established by the American
Institute -of Certified Public Accountants. A material weakness is a condition in which the design of one
or more of the internal control components does not reduce to a relatively low level the risk that errors or
irregularities in amounts that would be material to the financial statements being audited may occur and
not be detected within a timely period by employees in the normal course of performing their assigned
functions. We noted no matters involving the internal control over financial reporting and its operation
that we consider to be a material. weakness.
In addition to the reportable condition noted, we have noted other matters that we feet warrant
management's attention. These comments have been reported under the heading "Other Comments".
REPORTABLE CONDITION
(Non -material Weakness)
Sewer System Controls
Controls at the sewer utility are potentially weakened because of the utility's relationship with the
Bangor Water District, which is a.separate, non -City entity, The problem arises because the water and
sewer utilities share many aspects of billing and collection. 'Specifically, sewer bills are based upon
water usage data, as .provided by the water district; water and sewer bills are mailed together; sewer
payments maybe made at, among other places, the water district; and the water district's.billing and .
- payment software, which is incompatible with the City's general accounting software, is also employed
Bangor City Council .
October 10, 2002
Page 3
Segregation of Duties
Treasurer's Office
in the Treasurer's Office, mail receipts are opened and processed in certain circumstances by the same
.individual. Ideal segregation of duties provides for separation of functions by different individuals and,
therefore, would have mail receipts opened by an employee different from .the person processing the
receipt: This practice provides for verification of receipts processed and prevents receipts from being
diverted for unauthorized purposes.
We recommend that the City consider establishing a system requiring that a person different from the
employee opening the mail .process all mail receipts.
Sewer. Fund
Because there are only four individuals at the sewer fund who perform accounting related functions-, ideal
segregation of duties is impractical. Because of this,'we believe that the City should consider expanding
the,respotisibilities of the internal audit functions to provide for a periodic review of sewer fund
operations.
Sclwol Department
In the School Department, mail receipts are opened and processed -by the same individual. Ideal
segregation of duties provides for separation of functions by different individuals and, therefore, would
have mail receipts opened by an employee different from the person processing the receipt. In addition,
the individual who opens the mail keeps no cash receipt log. The cash receipts log should detail the
amount of each check, the date'received, and a description of what the amount is for. Periodically, the
cash receipts log -,should be reconciled with what has been recorded: "
Code Enforcement
In Code Enforcement, the same individual that receives payments also reconciles cash received to
permits issued. Ideal segregation of duties provides for separation of functions by different individuals
and, therefore, would have payments received by an employee other then the employee reconciling such
receipts. This practice provides for verification of permits issued and prevents receipts from being
diverted for unauthorized purposes.
Bangor City Council
October 10, 2002
Page 6
This report is intended solely for the use of the City Council and management and is not intended to be
and should not be used by anyone.other than these specified parties.
We wish to express our appreciation for the cooperation and assistance we received from the officials
and employees of the City during the course of our audit and to advise you that we are available to
provide any assistance required to implement the above suggestions.
Very truly yours,
SOUTH PORTLAND AUGUSTA WATERVILLE
20 Long Creek Drive 189 Water Street 30 Elm Street
South Portland ME 04106 Augusta ME 04330 Waterville ME 04901
Tel. 207-773-2986 Tel. 207-623-8401 Tel. 207-877-9397
Fax 207-772-3361 Fax 207-623-8404 Fax 207-877-9398