Nettie-Leivasy Public Service DistrictLocal Government

Segregation of Duties 2020-001 CONDITION: The Nettie-Leivasy Public Service District did not have sufficient segregation of duties within the Finance Office. CRITERIA:Specifically, the responsibility for approving, executing, and recording transactions is not assigned to separate individuals. Adequate internal controls over all areas requires staff assigned the duties of approving, executing, and recording transactions must be properly segregated. CAUSE: The entity has not implemented proper control procedures to sufficiently segregate duties. EFFECT: Internal controls elements do not reduce to a relatively low level the risk that errors or irregularities, in amounts that would be material in relation to the financial statements, may occur and not be detected in a timely manner. RECOMMENDATION: The Nettie-Leivasy Public Service District should review the duties assigned to their staff and make every effort to properly segregate duties in such a way as to decrease the risk of error. If adequate segregation of duties cannot be obtained, the entity should establish additional alternative procedures to increase internal controls. Such as alternative procedures to include increase review of the expense of by at least one board member and acknowledgment by department heads of all expense incurred with their department both for external and internal expenses. RESPONSE OF RESONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS:None provided

2020-002 Internal Control over Accounting Federal Awards & Financial Accounting Records CONDITION: Nettie-Leivasy Public Service District?s (PSD) was provided during the audit the required adjustments, which included the basis and amounts for the adjustments, to the accounting records to adequately account for Federal Awards and Financial Accounting. However, the PSD declined to address the finding which resulting in the basis for the qualification of the fiscal year (FY) ending June 30, 2020, audit report. See Exhibit A for greater detail of the identified financial statement adjustments amount and accounts as well an adjusted Schedule of Expenditures of Federal Awards (SEFA). The errors in the PSD?s presented financial statement are ?the incurred federal expenditures for loan programs are only being recognized on a cash basis and not on an accrual basis which resulted in the understatement of the receivable for the incurred expenditures and increase in the related long-term liability to fund the incurred expenditures as well as the omission in the SEFA of the expenditure. ?additional project information regarding the federal awards subsequent to the issue date of FY 2020 financial statements compilation report but before the audit started that affected those statements to which the PSD was made aware of during the audit were not address or statements updated for the audit as is required. The lack of address this additional information caused understatement of both FY 2019 and FY 2020 related water system construction accounts. ?A review of the PSD?s compensated absence policy regarding potential liability for found that the PSD was not liable for the payment of unused earned paid time off upon the separation of the employee. Thus, the liability for compensated absence should be removed for the statements. ?The account of accrued interest is overstated with the inclusion of interest payable for funding provided to the PSD during FY 2020 for the Water System improvement federally funded project. ?The John Deere Generator loan payable is overstated and interest on long-term debt understated when reconciled back to loan balance confirmation. CRITERIA: Proper internal control over the accounting records for both federal awards and financial accounting is necessary for the preparation accurate financial statements to allow for ? effective management by those charged with governance, and ? the detection in a timely manner errors or omission that may lead material misstatements. CAUSE: The PSD has not adopted and implemented proper control procedures required to maintain an adequate account balances for both federal awards and financial accounting in general ledger system for applicable and accurate account balances in their accounting records. There exists inadequate internal control over the evaluation by an individual with the skills, knowledge or experience of the finding discovered during an audit for acceptance, modification, or rejection of the findings for the PSD to maintain accurate account balances within the accounting system used to control the accounting records. EFFECT: The lack of adopting and implementing internal controls required to maintain adequate accounting records to maintain proper financial oversite of the organization. RECOMMENDATION: The PSD should adopt sufficient internal controls to ensure errors and/or proposed adjustment discovered in the accounting records are evaluation by an individual with the skills, knowledge or experience of the finding discovered during an audit for acceptance, modification, or rejection of the findings to maintain complete and accurate accounting records. These internal controls should include adjusting the accounting records in a timely manner, adding accounts as needed, and maintain the support of the basis of the adjustment of the accounts. RESPONSE OF RESONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS: None provided