Audit 364399

Finding 2024-001: External Financial Reporting Significant Deficiency Criteria: Properly designed policies and procedures and implementation of the policies and procedures are an integral part of ensuring the reliability and accuracy of the Authority’s financial statements. Condition: The Authority’s accounting staff does not possess the necessary expertise to ensure that certain financial statement reporting and disclosure requirements of generally accepted accounting principles are appropriately addressed. Adjustments were made to the financial statement amounts and disclosures to properly address these requirements. Cause: The operating budget for an organization the size of the Authority does not allow for hiring someone with this expertise. Effect: The financial statements prepared by management will be incomplete without adequate footnote disclosures. Recommendation: Resolving the deficiency would require the Authority to hire additional accounting staff who possess the necessary expertise required for preparation of external financial statements in accordance with generally accepted accounting principles. This solution may result in a substantial increase in operating costs. The other action would be to accept that by definition there is a significant deficiency in internal control and cost of eliminating that deficiency would exceed its benefit. Views of Responsible Officials and Planned Corrective Action: The Authority has determined that the operating budget cannot handle the additional expense of hiring someone with this expertise, and the cost of eliminating the deficiency would exceed it benefit.. Conclusion Response accepted.

Significant Deficiency Criteria: Management is responsible for establishing and maintaining internal control. A good system of internal control provides for adequate segregation of duties so no one individual handles a transaction from its inception to completion. In order to maintain proper internal control, duties should be segregated so the authorization, custody and recording of transactions are not under the control of the same employee. This segregation of duties helps prevent losses from employee error or dishonesty and maximizes the accuracy of the Authority’s financial statements. Condition: An adequate segregation of duties was not present related to the accounting and financial duties. As a result, many of those aspects of internal control procedures which rely upon an adequate segregation of duties are, for all practical purposes, missing. Cause: The operating budget for an organization the size of the Authority does not allow for the hiring of additional accounting personnel to further segregate incompatible accounting duties. Effect: One individual may have complete control over certain transactions without adequate checks and balances or reviews being performed. This could adversely affect the Authority’s ability to prevent, or detect and correct, misstatements, errors or misappropriation on a timely basis by employees in the normal course of performing their assigned functions. Recommendation: We realize segregation of duties is difficult with a limited number of employees. However, the Authority should review its procedures to obtain the maximum internal control possible under the circumstances, utilizing currently available staff to provide additional control through review of financial transactions, reconciliations and reports. These independent reviews should be documented by the signature or initials of the reviewer and the date of the review. Views of Responsible Officials and Planned Corrective Action: The Authority will continue to monitor its policies and procedures in an effort to improve control efficiencies, however, at this time, the Authority has determined that the cost of eliminating the deficiency would exceed its benefit. Conclusion Response accepted. INSTANCES OF NONCOMPLIANCE No matters noted.

Finding 2024-001: External Financial Reporting Significant Deficiency Criteria: Properly designed policies and procedures and implementation of the policies and procedures are an integral part of ensuring the reliability and accuracy of the Authority’s financial statements. Condition: The Authority’s accounting staff does not possess the necessary expertise to ensure that certain financial statement reporting and disclosure requirements of generally accepted accounting principles are appropriately addressed. Adjustments were made to the financial statement amounts and disclosures to properly address these requirements. Cause: The operating budget for an organization the size of the Authority does not allow for hiring someone with this expertise. Effect: The financial statements prepared by management will be incomplete without adequate footnote disclosures. Recommendation: Resolving the deficiency would require the Authority to hire additional accounting staff who possess the necessary expertise required for preparation of external financial statements in accordance with generally accepted accounting principles. This solution may result in a substantial increase in operating costs. The other action would be to accept that by definition there is a significant deficiency in internal control and cost of eliminating that deficiency would exceed its benefit. Views of Responsible Officials and Planned Corrective Action: The Authority has determined that the operating budget cannot handle the additional expense of hiring someone with this expertise, and the cost of eliminating the deficiency would exceed it benefit.. Conclusion Response accepted.

Significant Deficiency Criteria: Management is responsible for establishing and maintaining internal control. A good system of internal control provides for adequate segregation of duties so no one individual handles a transaction from its inception to completion. In order to maintain proper internal control, duties should be segregated so the authorization, custody and recording of transactions are not under the control of the same employee. This segregation of duties helps prevent losses from employee error or dishonesty and maximizes the accuracy of the Authority’s financial statements. Condition: An adequate segregation of duties was not present related to the accounting and financial duties. As a result, many of those aspects of internal control procedures which rely upon an adequate segregation of duties are, for all practical purposes, missing. Cause: The operating budget for an organization the size of the Authority does not allow for the hiring of additional accounting personnel to further segregate incompatible accounting duties. Effect: One individual may have complete control over certain transactions without adequate checks and balances or reviews being performed. This could adversely affect the Authority’s ability to prevent, or detect and correct, misstatements, errors or misappropriation on a timely basis by employees in the normal course of performing their assigned functions. Recommendation: We realize segregation of duties is difficult with a limited number of employees. However, the Authority should review its procedures to obtain the maximum internal control possible under the circumstances, utilizing currently available staff to provide additional control through review of financial transactions, reconciliations and reports. These independent reviews should be documented by the signature or initials of the reviewer and the date of the review. Views of Responsible Officials and Planned Corrective Action: The Authority will continue to monitor its policies and procedures in an effort to improve control efficiencies, however, at this time, the Authority has determined that the cost of eliminating the deficiency would exceed its benefit. Conclusion Response accepted. INSTANCES OF NONCOMPLIANCE No matters noted.