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<br />FRAUD CONSIDERATIONS <br />Ms. Lenk stated that every statement must include an assessment of fraud risks. Fraud <br />considerations are established under SAS 99. She said there are two types of fraud. <br />One is the fraudulent finance report that makes the financial statements look better. <br />The other could be misappropriation of assets such as stealing cash, misusing <br />equipment, submitting fictitious invoices or falsifying time on time sheet. Ms. Lenk <br />spoke on types of fraud, the fraud triangle, and what their procedures and <br />responsibilities were concerning fraud. Ms. Lenk noted that there are three key <br />elements that identify if a person might commit fraud. <br /> <br /> Incentives or pressures such as large amount of financial commitments or some <br />type of an addiction. <br /> <br /> Opportunity due to lack of effective controls or no controls. <br /> <br /> Attitudes and rationalization – it is okay to do because it was rationalized. <br /> <br />Mr. Price asked if the auditors made recommendations concerning fraud. Ms. Lenk said <br />they do by providing recommendations for a procedural change to strengthen controls. He <br />referred to the issue of handling cash. Ms. Lenk noted the last year there was a lack of <br />segregation of duties dealing with cash receipts and they will follow up this year to see what <br />changes were made. <br /> <br />Mr. Glickert asked if the City was prepared now for the upcoming three -week audit. He <br />asked if any distractions or road-blocks were seen. <br /> <br />The Director of Finance Tina Charumilind said their goal is that they will meet the deadline <br />and will have everything the auditors request in a timely manner. She noted staff has <br />worked on reconciliations and the department now has qualified staff working on different <br />topics, so they can be combined together to provide a comprehensive financial report. Ms. <br />Charumilind said they will put together the financial report along with providing the <br />supporting documents for the auditors review. <br /> <br />Mr. Glickert asked how many field team members are brought in and Ms. Lenk said usually <br />three to four. <br /> <br />Mr. Sharpe asked why financial questions would not just go the Finance Director. Ms. Lenk <br />said it would go to her first but will go to a higher level if they are not able to get the <br />information requested. <br /> <br />Ms. Carr noted that last year there were 400 items staff had to prepare before they could <br />begin the audit, so she was asking if they anticipated some preparatory work this year. Ms. <br />Lenk stated that they are not anticipating that this year. <br /> <br />Mr. Price asked if they provide previous years’ comparisons in their reports. Ms. Lenk <br />stated they did. The current year’s findings would be in the front and all the prior year <br />findings with their status would be listed in the back of the report. <br /> <br />Mayor Welsch asked if there was a rule that required the City to put their pension liabilities <br />on the books. If so, would it require the City to set aside money now or would the City just <br />acknowledge that it is something that will need to be handled in the future? <br /> <br />Ms. Lenk said governmental financial reporting requires two sets of financial statements, <br />one would be a government-wide financial statement which is prepared on a full accrual <br />3 <br /> <br /> <br />