CITY OF PRATTVILLE AIRPORT AUTHORITY

Finding 2020-001 - Material Weakness Criteria - Contacts for professional services should be written and approved timely by the governance of the Authority. Condition - As of September 30, 2020, the Airport manager contract had not been finalized. The previous contract terms were not being followed, rather an oral arrangement had been in effect since June 2019. Effect - There was uncertainty at the time the contract terms changed. Detailed terms, such as Airport manager responsibilities, expense accountability, and other duties were being accounted based on the aforementioned oral arrangement. Cause - There was a delay in finalizing the Airport manager contract and communicating the terms of the arrangements to the accounting function. Recommendation - A written contract with the Airport manager should be finalized in a timely manner as a sound governance practice. Views of responsible officials - The Board of Directors agrees with the finding and is currently in negotiations of a new contract.

Finding 2020-002 - Material Weakness Criteria - The Authority?s financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recognized when they are earned and measurable. Expenditures are recognized when they are incurred. Condition - Policies and procedures over the recording of transactions occurring at or near year end are not adequate to capture all material accruals. Effect - The Authority?s balances of intergovernmental receivables, revenues, accounts payable, and capital assets were understated. Our audit procedures identified current year receivables of approximately $826,000 and current year payables of approximately $812,000 that were not accrued by the Authority. Cause - The Authority reviews all transactions subsequent to year end through a specific cutoff date to determine which transactions should be accrued. The application of these procedures, however, was inconsistent, and the procedures did not adequately consider all significant receipts and expenses. Recommendation - The Authority should enhance its supervisory review procedures to give special attention to transactions occurring at or near year end to ensure that all transactions have been properly recorded. Procedures should include a comprehensive assessment of new and existing expenses that are susceptible to accrual. Once these potential accruals are identified, a process should be formalized to capture the accruals and allow for supervisory review. Views of responsible officials - The Board of Directors agrees with the finding and will give special attention to transactions occurring at year end to ensure that all transactions have been properly recorded.

Finding 2020-003 - Significant Deficiency Criteria - Segregated duties is the means by which no one person has sole control over the initiation, recording, and authorization functions of a transaction or process. Condition - There is inadequate segregation of duties over the cash receipts process. One individual prepares the bank deposit and takes the deposit to the bank. There is no independent review of cash receipts prior to the deposit or independent review of the deposit receipt to ensure all receipts were actually deposited. Effect - A lack of segregation of duties increases the susceptibility of assets to misappropriation and the susceptibility of the financial statements to fraud or error. Cause - The Authority has not assigned individuals to perform these segregated functions. Recommendation - We recommend that the Authority implement a policy that segregates the preparation and taking of deposits to the bank. The person who prepares the deposits should verify that the deposit receipts agree to the original deposit slips. Views of responsible officials - The Board of Directors agrees with the finding and will institute procedures to segregate these duties to the extent that its resources allow.

Finding 2020-004 - Significant Deficiency Criteria - Controls should be in place to monitor fuel inventory. Condition - Fuel inventory and related sales are not sufficiently monitored. Effect - A lack controls and processes increase the susceptibility of assets to misappropriation and the susceptibility of the financial statements to fraud or error. Cause - The Authority has not assigned individuals to perform these segregated functions. Recommendation - We recommend that the Authority implement processes and controls over fuel inventory and sales. Views of responsible officials - The Board of Directors agrees with the finding and will institute processes and controls over fuel inventory and sales.

Finding 2020-005 - Material Weakness Criteria - The Authority is required to have appropriate internal controls over the preparation of the schedule of expenditures of federal awards in accordance with Uniform Guidance. Condition - The Authority?s internal controls over the preparation of the schedule of expenditures of federal awards were not adequate to ensure its accuracy and completeness, including procedures to assess the federal awards received subsequent to year end for expenditures incurred during the fiscal year. Effect - The Authority?s federal awards could be incorrectly identified resulting in improper reporting of federal program activity. Cause - The Authority?s internal controls over the preparation of the schedule of expenditures of federal awards are not adequate. Recommendation - The Authority should implement procedures to identify all federal expenditures and required elements of the schedule of expenditures of federal awards and require review by someone independent of the preparation process. Views of responsible officials - The Authority agrees with the finding. The Authority will implement procedures to identify all federal expenditures and required elements of the schedule of expenditures of federal awards and require review by someone independent of the preparation process.

Finding 2020-006 - Reporting (Noncompliance) Identification of the federal program - Airport Improvement Program - CFDA No. 20.106 Criteria - Recipients must specify whether a cash or accrual basis was used for preparing the Outlay Report and Request for Reimbursement for Construction Programs (SF-271) and the Federal Financial Report (SF-425). Financial reports should be prepared in accordance with the specified accounting basis. Condition - The Authority indicated the cash basis of accounting was used to prepare the Outlay Report and Request for Reimbursement for Construction Programs (SF-271) and the Federal Financial Report (SF-425). For the reporting period ended September 30, 2020, the Federal shares of expenditures improperly included invoices incurred in, but paid after, the reporting periods (accrual basis of accounting). The Federal share of the invoices should have been reported as Federal share of unliquidated obligations as required by the Federal Financial Report (SF-425) instructions, not as Federal share of expenditures. Effect - The Authority did not report accurate amounts on the Outlay Report and Request for Reimbursement for Construction Programs (SF-271) for the reporting period ended September 30, 2020 due to errors in compiling amounts from accounting records. Period expenditures reported were overstated by approximately $757,000. The Authority did not report accurate amounts on the Federal Financial Reports (SF-425) due to errors in compiling amounts from accounting records. For the reporting period ended September 30, 2020, the Federal share of expenditures was overstated by approximately $757,000 and the Federal share of unliquidated obligations was understated by approximately $757,000. Cause - The Authority?s policies and procedures over federal award reporting were not adequate. Recommendation - The Authority should strengthen its policies and procedures related to federal award reporting to comply with reporting requirements. Views of responsible officials - The Authority agrees with the finding. The Authority will implement additional review procedures over grant reporting requirements, including more adequate review of reports prepared by third-party grant administrators.

Finding 2020-007 - Reporting (Significant Deficiency) Identification of the federal program - Airport Improvement Program - CFDA No. 20.106 Criteria - 2 CFR 200.303, Internal Controls, requires that recipients establish and maintain effective internal control over Federal awards that provides reasonable assurance that the recipient is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. Condition - In certain instances, instructions attached to the Federal Financial Report (SF-425) and Outlay Report and Request for Reimbursement for Construction Programs (SF-271) were not properly followed. Effect - Several financial items included in the federal award financial reports were inaccurately reported, the most significant of which are included in the previous finding. Cause - The Authority?s internal controls over federal award reporting were not adequate. There is a lack of monitoring and appropriate review by the Authority of the reports prepared by the external grant administrator. Recommendation - The Authority should strengthen its internal controls related to federal award reporting and should implement policies and procedures to monitor and review all reports prepared and submitted by the external grant administrator on behalf of the Authority. Views of responsible officials - The Authority agrees with the finding. The Authority will implement additional review procedures for all grant reporting.