SIOUX FALLS, S.D. (KELO) — Although there are state regulations that cover audits or internal reviews for cities in South Dakota, city officials themselves can be a good watchdog for any financial wrongdoings, said Russell Olson, the Local Government Audit Manager for the state of South Dakota.

Olson was involved in the state audit and review of the city of Tripp, which led to charges against former finance director Jennifer Friederich. Friederich is accused of stealing about $500,000 from the city.

The embezzlement was found when the South Dakota Department of Legislative Audit reviewed the city’s finances in September. That review lead to a more thorough investigation by the department that led to charges against Friederich.

A Dec. 31, 2018, audit by Schoenfish and Co. found that former Springfield Municipal Finance Officer Ashlea Pruss used the city’s debit card for personal gain and reimbursed herself for personal expenses that could not be verified.

Pruss has pleaded guilty to embezzling between $5,000 and $100,000 from the city of Springfield. The Dec. 31, 2018, audit said it discovered a potential $24,713.22 in money in fraudulent theft by Pruss.

Olson said he received a phone call with concerns about misuse of city funds in Springfield.

No matter what size of town, “There should always be some sort of internal control,” Olson said.

Small cities often don’t have multiple people handling finances to create a check and balance structure on payments made or payments received. Often, one person is the city’s finance manager, clerk or has a similar role, so there are no segregation of duties for a check and balance on money coming in or going out from the city.

If other city officials, such as city council members, don’t have access to or check financial records, the city can be vulnerable, Olson said.

For example, in Tripp, the state audit on Sept. 23 found that the “Municipality’s governing board did not receive or review the statements of the Municipality’s financial institution accounts and compare the statements with the reconciled cash balances of the Municipality.”

In Springfield, the Dec. 31 audit report said it found material weaknesses in internal control. Among the findings in the report were checking accounts were not reconciled at the end of the month and that proper control was not maintained over the mayor’s signature stamp.

Even if the city has a small staff with limited or no segregation of duties, Olson said, city officials, such as council members, can develop a structure that can help prevent embezzlement.

Technology is available so that city officials have limited viewing access to the city’s bank account, Olson said. Officials can make a query and check on payments, expenses, revenue and other items, he said.

Or a designated city official could regularly review bills, payments and other financial data, such as a monthly review of bills.

Cities as large as Sioux Falls may have a regular audit by an outside firm. The city also conducts internal audits.

But smaller towns don’t always have annual audits. Nor are they required to by law.

Cities with annual revenue of less than $100,000 are required to file an annual report to the state; cities with annual revenue of $100,000 to $600,000 are required to have internal control reviews once every five years. Cities with annual revenue of more than $600,000 must have an audit every two years.

The city of Tripp is in the $100,000 to $600,000 category.

Olson said the city of Springfield is required to have an audit at least once every two years. The city has had audits since 2005, he said.

South Dakota’s audit laws differ from those in the neighboring states of Nebraska, Iowa and Minnesota.

In Iowa, cities under 2,000 population with $1 million or more in budgeted expenditures in two consecutive years will be required to have an annual examination. Cities with budgeted expenditures of $1 million or more in a single year will continue to be subject to a periodic examination, not an annual examination.

Cities under 2,000 population with less than $1 million of budgeted expenditures will be subject to a periodic examination to be performed at least once every eight years.

Minnesota’s requirements are more involved.

Cities over 2,500 in population, according to the latest census, must have an annual audit in accordance with generally accepted accounting principles.

Cities under 2,500, where there are separate offices of clerk and treasurer, are not generally required by Minnesota law to have an audit.

Cities under 2,500 with the combined office of clerk and treasurer must have an annual audit if total revenues exceed the annual threshold.

Cities under 2,500 with the combined office of clerk and treasurer must have an agreed-upon procedures engagement once in every five-year period if total revenues are equal to or less than the annual threshold. The threshold for the year ending in Dec. 31, 2018, was $225,000.

Cities in Nebraska are required to have an annual audit and submit it to the state, but there are exceptions, said Deann Heaffner of the Nebraska State Auditor’s Office.

Cities that have less than $300,000 in annual expenses can apply for a waiver of the annual audit, Heaffner said. Those applications are reviewed and typically, if there is no reason to suspect wrongdoing, they are granted, she said.