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- 2 - depends upon segregation of duties can be circumvented by collusion or where the number of persons employed is too small to allow proper segregation, control procedures cannot be implemented. Similarly, control procedures can be circumvented intentionally by management either with respect to the execution and recording of transactions or with respect to the estimates and judgments required in the preparation of financial statements. Further projection of any evaluation of internal accounting control to future periods is subject to the risk that the procedures may become inadequate because of changes in cond i tions and that the degree of compliance with the procedures may deteriorate. Our examination of the financial statements made in accordance with generally accepted auditing standard's, incl ud- ing the study and evaluation of the City's system of internal accounting control for the year ended September 30, 1983, that was made for the purposes set forth in the first paragraph of this report, would not necessarily disclose all weaknesses in the system because it was based on selective tests of accounting records and related data. The following items are submitted for your review and consideration. GASOLINE PURCHASES. During our examination, we fo und that there is only an informal method of obtaining bids for gasoline purchases. Typically, the shop manager ca 11 s a few of the suppliers for the best price and then informs the public works administrator of the best price. We feel that formal bids should be sent out for fuel purchases, and that this procedure will aid internal control by involving management. The bids could be taken for contracted amounts not to ex ceed certain gallon limitations. PURCHASE ORDERS. During our audit, we noted that the purchase order system is not be i ng properly used by some departments within the City. The use of purchase orders in an encumbrance system should indicate to a department head whether or not that purchase will exceed the budget for that line item. We noted instances where invoices were dated pr ior to the date of purchase orders or where the amount of the invoice did not agree with the purchase order amount. These situations may result in overspending the budget. We recommend that department heads review the proper proced ures for the use of purchase orders. Harold V. Simpson & Company, Certified Public Accountants, Austin, Texas