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CITY OF ABC, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect By not filing claims for reimbursement on a timely basis, cash flow and investment income is not being maximized. The failure to properly record grant revenue can result in inaccurate financial statements. Cause Proper controls are not in place to ensure that grant revenues are properly recorded. Additionally, the various City departments fail to prepare claim forms for reimbursement on a timely basis, and do not remit the information to the Finance Department to ensure receivables are properly rdlected. Recol1ll1lel1datioll It is recommended that procedures be implemented to ensure that all claims for reimbursement are filed on a timely basis. All expenditures incurred for reimbursable grants should be monitored to ensure that claims are filed. As soon as a request for reimbursement is made, the information should be remjtted to the Finance Department to ensure proper recording on the books and records. All grant funds should be reviewed to ensure that the proper receivables/deferrals are recorded in accordance with promulgated practices. Supervisory Finance Department staff should perform a review of the City's books and records to ensure that all transactions have been properly recorded. 05-03 EIlCUl1lbral1ces Criteria Encumbrances represent commitments for purchases that have not yet taken place, or in the case of capital projects, balances of contracts not completed. Encumbrances are reflected in the financial statements as a reservation of fund balance. As such, it is important to ensure that the amounts retlected are valid commitments of the City and are in agreement with detailed subsidiary reports. Co 11 ditio 11 · We were provided with an open purchase order report which detailed all open purchase orders by fund, account code and vendor. We noted that the totals by fund were not in agreement with the balances reflected on the final trial balances provided to us. . We noted that numerous items recorded as encumbrances were also accrued as liabilities. A schedule was provided to us by Finance Depa[1ment personnel to adjust these items, however, that schedule was not accurate in that it also included amounts that were ill fact accrued, but were not recorded as encumbrances. Additionally, our test procedures identified other instances where amounts which were accrued and encumbered, were not included in the adjustment schedule provided to us. · We noted one instance where a large purchase order was recorded as an encumbrance, yet the purchase order had been previously canceled. Effect The improper recording of encumhrances results in the unreserved andundesignated fund balance within the governmental funds being incorrectly misstated. -I 1-