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<br /> - 2 - <br /> There are inherent limitations that should be <br /> recognized in considering the potential effectiveness of any <br /> system of internal accounting control. In the performance of <br /> most control procedures errors can result from misunderstanding <br /> of instructions, mistakes of judgment, carelessness, or other <br /> personal factors. Control procedures whose effectiveness <br /> depends upon segregation of duties can be circumvented by <br /> collusion or where the number of persons employed is too small <br /> to allow proper segregation, control procedures cannot be <br /> implemented. Similarly, control procedures can be circumvented <br /> intentionally by management either with respect to the execu- <br /> tion and recording of transactions or with respect to the <br /> estimates and judgments required in the preparation of finan- <br /> cial statements. Further projection of any evaluation of <br /> internal accounting control to future periods is subject to the <br /> risk that the procedures may become inadequate because of <br /> changes in conditions and that the degree of compliance with <br /> the procedures may deteriorate. <br /> Our examination of the financial statements made in <br /> accordance with generally accepted auditing standards, includ- <br /> ing the study and evaluation of the City's system of internal <br /> accounting control for the year ended September 30, 1982, that <br /> was made for the purposes set forth in the first paragraph of <br /> this report, would not necessarily disclose all weaknesses in <br /> the system because it was based on selective tests of account- <br /> ing records and related data. The following items are <br /> submitted for your review and consideration. <br /> ANNUAL VACATIONS. Compulsory annual vacations should <br /> be required for all employees, especially those in accounting <br /> and financial positions. This would allow for other employees <br /> to handle their responsibilities so that several people are <br /> familiar with those responsibilities and allow for the smooth <br /> flow of work during all absences. <br /> ACCESS TO SAFETY DEPOSIT BOX. At present it is not <br /> required that more than one City employee be present to open <br /> the safety deposit box. Since only important documents are <br /> kept there, requiring two employees would provide greater <br /> control over these assets by insuring that access is <br /> authorized. <br /> Harold V. Simpson & Company, Certified Public Accountants, Austin, Texas <br />